Q: 'A' Guarantees payment to 'B' of the price of five sacks of flour to be delivered by 'B' to 'C' and to be paid for in a month. 'B' delivers five sacks flour to 'C'. 'C' pays for them. Afterwards 'B' de livers four sacks of flour to 'C' which 'C' does not pay for it. What is the liability of 'A'? Give reason ?

Ans: According to Sec. 126 of the Indian Contrac Act, 1872, a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.

Guarantee is classified into two types viz. specific guarantee and continuing guarantee. Specific guarantee deals with a single transaction. It is also known as simple guarantee. A specific guarantee cannot be revoked, when the liability is incurred. It comes to an end when the guaranteed debt is duly discharged or promised, is performed.

The instant case is a classic example of a specific guarantee. In this case, A guarantees to B only in respect of five sacks of flour to be delivered to C, the payment of which shall be made in a month's time. C makes the payment within the time frame allotted and thus the guarantee of A is discharged.

Further to this, B again delivers four sacks of flour to C which the latter defaults in payment.

The guarantee furnished by A was only a specific guarantee for the first transaction and therefore, he is not liable for the price of the four sacks later delivered by B to C.