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Revocation of continuing guarantee by change in the firm

A continuing guarantee may have been given to a third person for the benefit of the firm or to the firm for the benefit of a third person. According to Sec. 38 of The Indian Partnership Act, 1932, a continuing guarantee given to a firm or to a third party in respect of the transaction of a firm, in the absence of an agreement to the contrary, is revoked as to future transaction from the date of any change in the constitution of the firm.



X gave a continuing guarantee for the firm of A, B and C for proper performance of contract with Z. C retires from the firm and K is admitted into the firm. With this change in the constitution of the firm, the continuing guarantee came to an end on the day C retired.

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