Distinguish between Fidelity guarantee and Continuing guarantee.

Fidelity guarantee A surety's liability for the faithful discharge by another of his duties depends in each case on the exact terms of that guarantee. The surety is not discharged from the liability for the principal debtor's default because the default would not have happened if the creditor had used all the powers of superintending the performance of the debtor's duty which he could have exercised, because the employer of the servant whose due performance of work is guaranteed does not contract with the surety that he will use the utmost diligence in checking the servant's work. If the employer of a servant whose fidelity has been guaranteed continues to employ him even after a proved act of dishonesty without notice to the guarantor, the surety is discharged. That is a basic principle implicit in the very nature of a fidelity guarantee. The guarantor in such a case guarantees the fidelity and ensures the loss against the risk of infidelity and not the fact of infidelity. If the employer wants to continue a dishonest servant after his dishonesty has been proved then he must give the guarantor notice of the fact of infidelity so that the guarantor may get an opportunity to say whether he would continue his guarantee or not for a man whose infidelity has been proved. Continuing guarantee Section 129 of the Indian Contract Act, 1872 lays down that a guarantee which extends to a series of transactions is called a 'continuing guarantee', and according to Section 130, a continuing guarantee may be revoked by the surety at any time as to future transactions, by notice to the creditor. Continuing Guarantee is of two types, (i) Prospective (ii) Retrospective. The former one is given for future debt(s) and the latter one is given for existing debt(s). It is in the hands of the Surety to make sure that the liability regarding time or amount can be limited according to his wishes and interest. Under Continuing Liability, the Surety is liable for unpaid and left balance at the end of the guarantee.