‘Sooraj’ guarantees ‘Vikas’ for the transactions to be done between ‘Vikas’ & ‘Nikhil’ during the month of March 2023. ‘Vikas’ supplied goods of ` 30,000 on 01.03.2023 and of ` 20,000 on 03.03.2023 to ‘Nikhil’. On 05.03.2023, ‘Sooraj’ died in a road accident. On 10.03.2023, being ignorant of the death of ‘Sooraj’, ‘Vikas’ further supplied goods of ` 40,000. On default in payment by ‘Nikhil’ on due date, ‘Vikas’ sued legal heirs of ‘Sooraj’ for recovery of ` 90,000. Describe, whether legal heirs of ‘Sooraj’ are liable to pay ` 90,000 under the provisions of Indian Contract Act, 1872. What would be your answer, if the estate of ‘Sooraj’ is worth ` 45,000 only?

According to section 131 of Indian Contract Act, 1872, in the absence of a contract to contrary, a continuing guarantee is revoked by the death of the surety as to the future transactions. The estate of deceased surety, however, liable for those transactions which had already taken place during the lifetime of deceased. Surety’s estate will not be liable for the transactions taken place after the death of surety even if the creditor had no knowledge of surety’s death. In this question, ‘Sooraj’ was surety for the transactions to be done between ‘Vikas’ & ‘Nikhil’ during the month of March, 2023. ‘Vikas’ supplied goods of ` 30,000, ` 20,000 and of ` 40,000 on 01.03.2023, 03.03.2023 and 10.03.02023 respectively. ‘Sooraj’ died in a road accident, but this was not in the knowledge of ‘Vikas’. When ‘Nikhil’ defaulted on payment, ‘Vikas’ filed suit against legal heirs of ‘Sooraj’ for recovery of full amount i.e. ` 90,000. On the basis of above, it can be said in case of death of surety (‘Sooraj’), his legal heirs are liable only for those transactions which were entered before 05.03.2023 i.e. for ` 50,000. They are not liable for the transaction done on 10.03.2023 even though Vikas had no knowledge of death of Sooraj. Further, if the worth of the estate of deceased is only ` 45,000, the legal heirs are liable for this amount only.