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    Contract of Guarantee

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    23.divyansh.k
    A contract of guarantee involves three parties: a surety who provides the guarantee, a principal-debtor for whose obligations or debts the guarantee is provided, and a creditor to whom the guarantee is given. The surety guarantees to the creditor that they will fulfill the promise of the principal-debtor or discharge their liability if the principal-debtor defaults. The liability of the surety is secondary to the principal-debtor, though the creditor can choose to pursue the surety without first pursuing the principal-debtor. The contract of guarantee must involve someone as the principal-debtor, consideration, consent of all parties, and is not required to be in writing.

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    Contract of Guarantee

    Uploaded by

    23.divyansh.k
    14 views9 pages
    A contract of guarantee involves three parties: a surety who provides the guarantee, a principal-debtor for whose obligations or debts the guarantee is provided, and a creditor to whom the guarantee is given. The surety guarantees to the creditor that they will fulfill the promise of the principal-debtor or discharge their liability if the principal-debtor defaults. The liability of the surety is secondary to the principal-debtor, though the creditor can choose to pursue the surety without first pursuing the principal-debtor. The contract of guarantee must involve someone as the principal-debtor, consideration, consent of all parties, and is not required to be in writing.

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    Presentation on contract of guarantee. bcom hons 1st sem business laws delhi university

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    contract of guarantee

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    A contract of guarantee involves three parties: a surety who provides the guarantee, a principal-debtor for whose obligations or debts the guarantee is provided, and a creditor to whom the guarantee is given. The surety guarantees to the creditor that they will fulfill the promise of the principal-debtor or discharge their liability if the principal-debtor defaults. The liability of the surety is secondary to the principal-debtor, though the creditor can choose to pursue the surety without first pursuing the principal-debtor. The contract of guarantee must involve someone as the principal-debtor, consideration, consent of all parties, and is not required to be in writing.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    14 views9 pages

    Contract of Guarantee

    Uploaded by

    23.divyansh.k
    A contract of guarantee involves three parties: a surety who provides the guarantee, a principal-debtor for whose obligations or debts the guarantee is provided, and a creditor to whom the guarantee is given. The surety guarantees to the creditor that they will fulfill the promise of the principal-debtor or discharge their liability if the principal-debtor defaults. The liability of the surety is secondary to the principal-debtor, though the creditor can choose to pursue the surety without first pursuing the principal-debtor. The contract of guarantee must involve someone as the principal-debtor, consideration, consent of all parties, and is not required to be in writing.

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    Contract of Guarantee

    Presented by- Divyansh


    According to Section 126 of the
    Act, “A contract of guarantee is
    a contract to perform the
    What is promise, or discharge the
    liability, of a third person in case
    contract of of his default”. The object of
    guarantee? contract of guarantee is to
    enable a person to get a loan or
    goods on credit or to get an
    employment.
    Parties involved in
    Contract of
    Guarantee
    A contract of guarantee has three
    parties, viz., the surety, the principal-
    debtor and the creditor.
    • The person who gives the guarantee
    is called the surety.
    • The person in respect of whose
    default the guarantee is given
    is called the principal-debtor.
    • The person to whom the guarantee
    is given is called the creditor.
    Relationship among Parties

    • One, between the creditor and the principal-debtor creating the debt, etc.
    • Second, between the surety and the creditor guaranteeing the
    performance
    • Third, between the principal-debtor and the surety by which the principal-
    debtor requests the surety to act as such and impliedly promises to
    indemnify the surety in case surety is called upon by the creditor to pay off
    the debt due by the principal- debtor.
    These must be someone liable as principal-debtor.

    There must be consideration.


    Essential
    Features of a There should not be misrepresentation or
    Contract of concealment of material facts.

    Guarantee
    All the parties must consent.

    Writing is not necessary.


    Contract of Indemnity
    A contract of indemnity is a contract by
    which one party promises to save
    another harmless from loss caused as
    a result of transaction entered at the
    instance of the promisor.

    Contract of Indemnity vs.


    Contract of Guarantee
    Contract of Guarantee
    A contract of guarantee is a contract to
    perform the promise, or
    discharge the liability, of a third person
    in case of his default.
    Nature and Extent of Surety’s Liability

    The liability of the surety is only secondary.

    In case of default by the principal debtor it is open to the creditor not to sue the principal-debtor first; he
    may straightway proceed against the surety, unless the contract provides that the creditor has to sue the
    principal-debtor first, and then only the surety.

    Where a creditor hold securities from the principal-debtor, he (the creditor) need not resort to these
    securities before suing the surety, unless there is a contract to the contrary.

    Once the liability of the surety arises, it is co-extensive with that of the principal-debtor.
    Any guarantee which has been obtained by the creditor misrepresenting a material part of the transaction or by keeping
    silence as to material circumstances is not valid and therefore the surety will not be liable in such cases (Sections 142 and
    143).

    It is not necessary that surety is liable only if the principal-debtor is liable.

    Where a person gives a guarantee upon a contract that a creditor shall not act upon it until another person has joined in it as
    co-surety, the guarantee is not valid if the other person does not join.

    The contract of guarantee may provide for conditions precedent to the surety’s liability.

    A continuous guarantee is not exhausted by the first advance or credit upto the specified limit.
    Thank You!

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