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GUARANTEE definition: 1. a promise that something will be done or will happen, especially a written promise by a company…. Learn more.
- Introduction
- What Is A Contract of Guarantee?
- Essentials of A Contract of Guarantee
- Kinds of Guarantee
- Continuing Guarantee
- Period of Limitation
- Rights of A Surety
- Discharge of Surety from Liability
- Extent of A Surety’s Liability
- Conclusion
Black laws dictionary defines the term guarantee as the assurance that a legal contract will be duly enforced. A contract of guarantee is governed by the Indian Contract Act,1872and includes 3 parties in which one of the parties acts as the surety in case the defaulting party fails to fulfill his obligations. Contracts of guarantee are mostly requi...
Section 126of the Indian contract act defines a contract of guarantee as a contract to perform the promise or discharge the liability of the defaulting party in case he fails to fulfill his promise. Thus here we can infer that there the 3 parties to the contract Principal Debtor– The one who borrows or is liable to pay and on whose default the guar...
1) Must be made with the agreement of all three parties
All the three parties to the contract i.e the principal debtor, the creditor, and the surety must agree to make such a contract with the agreement of each other. Here it is important to note that the surety takes his responsibility to be liable for the debt of the principal debtor only on the request of the principal debtor. Hence communication either express or implied by the principal debtor to the surety is necessary. The communication of the surety with the creditor to enter into a contra...
2) Consideration
According to section 127of the act, anything is done or any promise made for the benefit of the principal debtor is sufficient consideration to the surety for giving the guarantee. The consideration must be a fresh consideration given by the creditor and not a past consideration. It is not necessary that the guarantor must receive any consideration and sometimes even tolerance on the part of the creditor in case of default is also enough consideration. In State Bank of India v Premco Saw Mill...
3) Liability
In a contract of guarantee, the liability of a surety is secondary. This means that since the primary contract was between the creditor and principal debtor, the liability to fulfill the terms of the contract lies primarily with the principal debtor. It is only on the default of the principal debtor that the surety is liable to repay.
Contracts of guarantees may be classified into two types: Specific guarantee and continuing guarantee. When a guarantee is given in respect of a single debt or specific transaction and is to come to an end when the guaranteed debt is paid or the promise is duly performed, it is called a specific or simple guarantee. However, a guarantee which exten...
A continuing guarantee is defined undersection 129 of the Indian Contract Act,1872. A continuing guarantee is a type of guarantee which applies to a series of transactions. It applies to all the transactions entered into by the principal debtor until it is revoked by the surety. Therefore Bankers always prefer to have a continuing guarantee so that...
The period of limitation of enforcing a guarantee is 3 years from the date on which the letter of guarantee was executed. InState Bank Of India vs Nagesh Hariyappa Nayak And Ors,against the advancement of a loan to a company, the guarantee deed was executed by its directors and subsequently a letter acknowledging the load was issued by same directo...
After making a payment and discharging the liability of the principal debtor, the surety gets various rights. These rights can be studied under three heads: (i) rights against the, principal debtors. (ii) rights against the creditor, and (iii) rights against the co-sureties.
Under any of the following circumstances a surety is discharged from his liability: i) by the revocation of the contract of guarantee, ii) by the conduct of the creditor, or iii) by the invalidation of the contract of guarantee We have already discussed above the first circumstance in which how a surety can be discharged i.e by Revocation of the Co...
In the absence of a contract to the contrary, the liability of a surety is co-extensive with that of the liability of the principal debtor. It means that the surety is liable to the same extent to which the principal debtor is liable. Illustration A guarantees to B the payment of a bill of exchange by C, the acceptor. On the due date, the bill is d...
The contract of guarantee is a specific contract for which the Indian Contract Acy has laid some rules. As we have discussed, the basic function of a contract of guarantee is to protect the creditor from loss and to give him confidence that the contract will be enforced with the promise of the surety. Every contract of guarantee has three parties a...
4 days ago · What is Guarantee? The term "guarantee" is defined by the Black Laws Dictionary as "the certainty that a legal contract will be duly enforced."A guarantee contract is regulated by Indian Contract Act, 1872, and comprises of 3 parties, including one who serves as the guarantor if the defendant fails to meet his obligations.
4 days ago · : an agreement by which one person undertakes to secure another in the possession or enjoyment of something. b. : an assurance of the quality of or of the length of use to be expected from a product offered for sale often with a promise of reimbursement. The washer comes with a guarantee against major defects. 4. : guaranty sense 4. guarantee.
To guarantee is to promise or to a make binding agreement. If a baseball player guarantees his team will win the World Series, he better not lead the league in strikeouts.
In English law, a guarantee is a contract whereby the person (the guarantor) enters into an agreement to pay a debt, or effect the performance of some duty by a third person who is primarily liable for that payment or performance.
noun. 1. a formal assurance, esp in writing, that a product, service, etc, will meet certain standards or specifications. 2. law. a promise, esp a collateral agreement, to answer for the debt, default, or miscarriage of another. 3. a. a person, company, etc, to whom a guarantee is made. b.
