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In consideration of B's discounting, at A's request, bills of exchange for C, A guarantees to B, for…

Illustration (a) to section 130 says the revocation "discharges A from all liability to B for any subsequent discount", "But A is liable to B for the 2,000 rupees, on…

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In consideration of B's discounting, at A's request, bills of exchange for C, A guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. At the end of three months A revokes the guarantee, and C later defaults. What is A's liability?

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Correct answer A

Illustration (a) to section 130 says the revocation "discharges A from all liability to B for any subsequent discount", "But A is liable to B for the 2,000 rupees, on default of C". Section 130 lets a continuing guarantee be revoked by the surety "as to future transactions, by notice to the creditor", even within the stated period. Revocation looks forward only, so bills already discounted stay covered.

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