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Section 131: Revocation of continuing guarantee by surety's death

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 1872
Section 130 All 266 Sections of Indian Contract Act Section 132

Legal Commentary & Landmark Judgments: Section 131

Section 131 of the Indian Contract Act, 1872 establishes the statutory rule that the death of a surety automatically revokes a continuing guarantee with respect to future transactions, in the absence of an express contract to the contrary. This rule ensures that a deceased guarantor's estate is not exposed to open-ended post-mortem liabilities incurred by the principal debtor, while preserving the estate's liability for transactions accrued during the surety's lifetime.

  • Automatic Revocation by Operation of Law: In the absence of an express covenant to the contrary, death operates as an immediate statutory revocation without requiring formal notice of death to the creditor.
  • Preservation of 'Contract to the Contrary': Banks and institutional lenders routinely include clauses stipulating that the guarantee shall bind the legal heirs, executors, and estate of the guarantor notwithstanding death until formal written notice is given, which constitutes a valid 'contract to the contrary'.
  • Estate Liability Limited to Prior Transactions: The assets of the deceased surety in the hands of his legal representatives remain liable only for debts incurred prior to the date of death (or date of notice where contractually stipulated), subject to Section 50 of the CPC.
Key Landmark Precedents:
  • Durga Priya Choudhury v. Durga Pada Roy AIR 1928 Cal 204: The Calcutta High Court held that under Section 131, the death of the surety puts an end to the continuing guarantee regarding future transactions, and the estate of the deceased cannot be burdened with loans disbursed by the creditor subsequent to the surety's demise.
  • R.K. Diwan v. State of U.P. AIR 1979 All 321: The Allahabad High Court affirmed that where a deed of guarantee contains an express stipulation that the surety's heirs and estate shall remain bound until formal written revocation, such clause constitutes an effective contract to the contrary under Section 131.
Courtroom Practice & Strategic Litigation Guidance:

In defending legal representatives of a deceased guarantor, scrutinize the loan statements to identify the exact date of death versus the dates of subsequent debits or credit renewals. If the bank renewed the facility or extended fresh advances after death, plead Section 131 to absolve the estate from post-death liabilities, restricting recovery to assets inherited for pre-death dues.

Section 130 All 266 Sections of Indian Contract Act Section 132