Name : M SALMAN MAJEED

SECTION : A

REG NO / ROLL NO : L1F18LLBH0029

SUBJECT : LAW OF CONTRACT ( 2 )

TOPIC : CONTRACT OF GUARANTEE

SUBMITTED TO :
MAAM FREEHA KHALED
 SPECIMEN OF SURITY BOND

Please NOTE that this Surety Bond has to be

1) On Stamp Paper of Rs. l00/-

2) Surety of Mother & Father of the Candidate is not acceptable.

3) Please provide CNIC of person signing as surety as well as of witnesses.

The BOND dated the _____ JANURARY 12,2017____ day of

___MONDAY____ executed by Mr.____Shahid Amin______S/O______Amin
Asim_____residing at___ House # 88 Block A , Bahria Town, Lahore._____
herein after called the Employee and Mr. _____Fiaz Shah_____ S/O Ahmad _Ali
Shah _____ herein after called, the Surety in favor of Professional Employers
(Private) Limited, herein after called the Company, Whereas the Company agrees
to appoint as _____Employee____ in accordance with the terms and conditions of
his contractual appointment letter. And whereas the employee has accepted to
serve the Company and its Client and be bound by the service rules and other
regulations of the company as a condition of contractual recruitment.

NOW THERFORE THIS DOCUMENT WITNESSES AS UNDER: -

1. The___Mr Shahid Amin ( employee) (Principal debtor) ____ undertake

and binds, himself to serve the company in accordance with the company
regulations for the-whole, period of his contractual service from the date of
his employment in the company as aforesaid.

2. The __Mr. Shahid Amin (Principal debtor) ___ further under takes and
binds, himself to the _____Mr. Ilyas ( Employer )(Creditor)____, in the
 sum of Rs._________1 lac on interest of 10% per year_____ to be paid to
the _______creditor, Mr.Ilyas____, for which the
_______Creditor___________ or its clients might suffer any pecuniary
loss, damages or claim by reason or any act of fraud, forgery, breach of trust,
mismanagement and negligence or careless performance of duty on his part
during the entire period of his service.

3. The ___Mr.Fiaz Shah_(Surety)______ guarantees the company disciplined

behavior/conduct of the _____Mr ShahidAmin ( Principal debtor)____ as
required by the rules and regulations of the company and its clients and
undertakes to make good all pecuniary losses, damages or claims to the
extent of Rs.___1 lac_____ which the ___creditor, Mr. Ilyas __ or its
clients might suffer on account of any act of fraud, forgery, breach of trust,
mismanagement and negligence or careless performance of duty on the part
of the employee.

4. The Guarantee by the _____Mr. Fiaz (Surety)______, to the company also

extends to cover any fraud, forgery, connivance in which the employee is
found involved, directly or indirectly and by reason of which company
suffers any pecuniary loss, damage or claim.

5. This Bond will remain in force-till the ___EMPLOYEE ______________

remaining in contractual service of the company, and shall, not be ceased on
account of the death of the said employee, or termination of his services if
subsequently it is detected that the employee was directly or indirectly or
misappropriation of the company or its client’s fund, documents or goods in
which company has any pecuniary interest.

In Witness Whereof the Employee and the surety have affixed their signatures
on this DEED in the presence of the following witnesses on the date first
above mentioned.
EMPLOYEE: SURETY:
Name: MR . SHAHID AMIN Name: MR FIAZ SHAH
Signature: Signature:
Address: Address:
88 Block A , Bahria Town,
Lahore. HOUSE # 68 Wapda town
CNIC : 31104-2045-102-5 CNIC : 31104-2040-420-8

WITNESSES WITNESSES
Name: UMER MALIK Name: JUNAIDM ARHAM
Signature: Signature:

Address:44 BAHRIA TOWN LAHORE Address: WAPDA TOWN LAHORE

CNIC 31104-2214-102-4 CNIC 31104-4412-445-8

 Ilyas Rai versus Fiaz Shah

In this case it is stated that Mr . ILyas gave one 1 laac rupees to Mr

shahid on the guaranty of Mr fiaz that he will pay out the money if Mr
shahid is unable to return the money or do any fraud but when he gives the
loan the loan carry interest rate at 10% per annum . and Mr shahid
promised that he will return the money. but then the a financial crisis came
over and Mr shahdid request Mr ILyas to reduce the interest rate to 6% per
annum and also noy to sue him for 1 year this is all set and the mutual
understanding and agreement between the plaintiff and the defendant is
done without knowing the consent of the person who gives the surety . and
the plaintiff didn’t sue the defendant and principle debtor for one year after
this one year the principle debtor become insolvent and Mr ILyas brought a
suit against Mr fiaz and demanding his money back .

ISSUES FRAMED IN THIS CASE :

1. The duty of the defendant discharged as a surety with respect to

the circumstances of the case?

2. Is the defendant liable as surety to pay the amount the second

defendant had promised the plaintiff in the case?

The counsel of plaintiff said that under section 137 of contract act 1872
“Mere forbearance on the part of the creditor to sue the principal debtor or
to enforce any other remedy against him does not, in the absence of any
provision in the guarantee to the contrary, discharge the surety. But on the
other hand the the counsel of defendant said that under Section 133 of
contract act 1872 the surety is not liabel or the liability is discharged on
the surety if an agreement is done without knowing or taking the consent of
the person who gives surety and on the other hand in this case the
suretyship of defendant is now discharged under the Section 144 contract
act 1872 Any guarantee which the creditor has obtained by means of
keeping silence as to material circumstances is invalid.

1. The Parties to the prosecution devised under the watchful eye of the
court the matter of the obligation of underwriter that according to the
claims of the offended party was not regarded and seen by the
respondent. Then again the respondent cases that the terms and
states of the agreement he authoritatively became surety to have
been tempered and traded off upon by the shared assent of offended
party and second litigant without him being educated officially which
releases him of the surety ship
The section 126, 143 and 133 as section from 130 to 147 said that the
responsibility of the defendant is started when he gave the surety that
he will gave the money if any fraud is done by the principle detor

Section 126 of the Contract Act 1872

A "contract of guarantee" is a contract to perform the promise, or

discharge the liability, of a third person in case of his default. 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", and the person to whom the guarantee is given is
called the "creditor". A guarantee may be either oral or written.

The duty of a guarantor comes into existence as soon as the contract of

guarantee is constituted. However under certain circumstances the duty is
discharged which are referred to in Section 130 to 143 of the Contract
Act 1872.
The plaintiff’s counsel has brought the stance under Section 137 of the
Contract Act 1872 which reads:
(Mere forbearance on the part of the creditor to sue the principal
debtor or to enforce any other remedy against him does not, in the
absence of any provision in the guarantee to the contrary, discharge
the surety.)
However the section 137 is not applicable in this As it is the duty of the
creditor that he shall take the consent of the person who gave the surety of
the principle Debtor . but in this case nothing like this happened so the
surety is discharged of his liability as he is not take into consideration
when the promises are done between the principle debtor and the creditor
so Section 135 of the Contract Act 1872 says that and promise or
agreement or the compromise if made between the creditor and the
principle debtor without knowing of the surety or without knowlwdge or
consent of the surety it will discharge the liability of the surety and then the
surety is not liable to pay for the amount he was guaranteed for . so in this
case we can clearly see that the principle debtor requested from the
creditor to low the percentage to 6 % from 10 % and not ot sue him for year
that make a agreement and the surety is not involved in it . so this
discharges the liabbilty of the surety and now he is not responsible to for
the principle debtor .

2. As when the person become surety he is laible by law to pay the

money if the person for whom he became a surety or for the person
he guaranteed for and this laibilty is only applicable when he is
charged of this liability . now what the creditor / plaintiff done
discharges the liability of the surety / defendant as surety under the
laws that mentioned above and now he is not liable to pay for
principle debtor any more
JUDGMENT :

As the defendant / surety Mr Fiaz is not liable to compensate Mr .

ILyas anymore . As when they made an agreement they don’t get the
consent of Mr fiaz . and this is important to tell a surety when u r
making an agreement with principle debtor or Creditor

RELEVENT CASES :
Fishgold v. Sullivan Drydock & Repair Corp.
Hunter v. Allis-Chalmers Corp., Engine Div.

PROPOSITION : . Mr. Ilyas advances Rs. lac on the guarantee of

Mr. Fiaz. The loan carries interest at ten percent per annum.
Subsequently, Mr. Shahid becomes financially embarrassed. On Mr.
Shahid’s request, Mr. Ilyas reduces the interest to six per cent per
annum and does not sue Mr. Shahid for one year after the loan
becomes due. Mr. Shahid becomes insolvent. Can Mr. Iyas sue Mr.
Fiaz?