A continuing guarantee is a guarantee that applies to a series of transactions. It is a type of guarantee that is commonly used in banking contracts.
The surety in a continuing guarantee is liable for the debts of the principal debtor up to a certain amount, for a certain period of time, or for a certain number of transactions.
The surety can revoke a continuing guarantee by giving notice to the creditor. The notice must be in writing and must be given before the guarantee expires.
The surety cannot revoke a continuing guarantee if the creditor has already incurred a debt under the guarantee.
MCQs on Revocation of a Continuing Guarantee in Banking Contracts of Guarantee
- Which of the following is not a way to revoke a continuing guarantee?
- By giving notice to the creditor.
- By the death of the surety.
- By the bankruptcy of the surety.
- By the variation of the terms of the guarantee by the creditor and the principal debtor.
- Answer: By the death of the principal debtor. The death of the principal debtor does not revoke the guarantee.
- The surety can revoke a continuing guarantee by giving notice to the creditor. What is the minimum period of notice that the surety must give?
- There is no minimum period of notice that the surety must give. However, it is advisable to give as much notice as possible to give the creditor time to arrange alternative financing.
- The surety cannot revoke a continuing guarantee if the creditor has already incurred a debt under the guarantee. What does this mean?
- This means that the surety cannot revoke the guarantee if the creditor has already borrowed money from the principal debtor and the surety is liable for that debt.
- The surety can revoke a continuing guarantee if the creditor has breached the terms of the guarantee. What are some examples of breaches of the terms of the guarantee by the creditor?
- The creditor fails to provide the principal debtor with the funds that they have promised.
- The creditor changes the terms of the guarantee without the consent of the surety.
- The creditor fails to act in good faith towards the surety.