Professional Documents
Culture Documents
Contract of Guarantee
Contract of Guarantee
ractofGuar
ant
ee
Sect
ion126def
inesacont
ractofguar
ant
eeasunder:
-
"
A"cont
ractofguarant
ee,i
sacontr
actt
operfor
mt hepromiseordi
schar
get
hel
i
abi
l
ity
,ofa
t
hir
dpersonincaseofhisdef
aul
t"
.Thesect
ionfur
therprov
idest
hat:-
"Thepersonwhogi vestheguarant
eeiscal
ledthe"Surety
",t
hepersoninr
espectofwhose
defaultt
heguaranteeisgiv
eniscall
ed"Pri
nci
paldebtor"andthepersont
owhom theguarant
ee
i
sgi veniscal
l
edt he"cr
edit
or"
.
Aguar
ant
eemaybeei
theror
alorwr
it
ten"
.
Theobjectofacont
ractofguar
anteeist
opr ov
ideaddi
tional
secur
it
ytothecredit
orinthefor
m
ofapromisebythesuret
ytoful
fil
lacert
ainobl
igat
ion,
incasethepri
nci
paldebtorfai
lstodo
that
.
Inever
ycont ractofguar antee, t
her earethreepar ti
es,t
hecredit
or,thepr i
ncipalandt hesur ety.
Therearet hreecont ractsinacont ractofguar antee.Fi
rst
ly,
theprinci
pal debtorhimsel fmakes
apromisei nf av ouroft hecr editortoperform apr omiseetc.Secondly,suretyunder t
akest obe
l
iabl
etowar dst hecr editorifthepr inci
paldebt ormakesadef ault
.Thirdly,animpl i
edpr omi seby
thepri
ncipal debt orinf avouroft hesuret
yt hati ncasethesuret
yhast odi schargethel iabil
it
y
onthedef aultoft hepr i
ncipal debtor,t
hepr incipaldebt
orshalli
ndemni fythesur et
yf ort he
samewhenabor rowerandguar antorbothsi gnanagr eementinfavourofabank, theyar e
j
oint
lyandsev erall
yliableundert hatcontract.
Thecontractofguar ant
eei
snodoubtt
ri
part
it
einnatur
ebutiti
snotnecessaryoressent
ial
that
thepr
inci
pal debtormustexpr
essl
ybeapart
ytothecontr
actbyimpli
cat
ion.Thustherei
s
possi
bli
tythataper sonmaybecomeasuret
ywithoutt
heknowledgeandconsentofthe
pri
nci
paldebt or
.
Per
for
manceGuar
ant
eebyBanks:
Somet i
mesbankgi v
e" perf
ormanceguar ant
ee(orper f
ormancebond)onbehalfoftheapar t
y
toacontract
.Thebankgi v
ingsuchaguar anteeisboundbyt heobl
igat
ionundert
akenbyi t
.The
perf
ormanceguaranteeisan"autonomous"cont r
actandi mposesan"absol
uteobli
gati
on"on
thebankinit
sterms.Abankguar antee;f
orallpurpose,shoul
dbetakentobeacr edi
t-note
i
ssuedbyt hebanki
nf avouroft
heper soninwhosef avourthebankguarant
eehasbeeni ssued,
anditshouldbeencashabl
ejustl
i
keacr
edi
tnot
eor
dinar
il
yunl
esst
hei
ntent
ionoft
hepar
ti
esi
s
otherwise.
Ifabankhasunconditi
onall
yguarant
eedthepaymentofpri
ceont hesuppl
yofgoodsbythe
sell
ertothebuy
er,thebankisboundtohonourthi
sobli
gati
onandi nt
heeventofanydi
sput
e
betweenthesel
lerandthebuyer,
thebuyercannotobt
ainaninj
uncti
ontoprev
entthebankf
rom
honouri
ngtheguarantee.
Mai
nFeat
uresofaCont
ractOfGuar
ant
ee:
(1)TheCont r
actmaybeei t
heroralorinwr it
ing:Accor di
ngtoSect i
on126,aguarant
ee
maybeei t
heroral
orwri
tt
en.Ont hi
spoint,t
hepositi
onofI ndi
aisdiffer
entfr
om t
hatinEngland.
Accordi
ngtoEngli
shLaw,foravali
dcontractofguarantee,i
tisnecessaryt
hati
tshouldbein
writ
ingandsi
gnedbythepartytobechargedtherewith.
"Anyt
hingdone,oranypromisemadefort
hebenefi
toft
hepr
inci
pledebtmaybeasuf
fi
cient
consi
derat
iontothesuretyf
orgi
vingt
heguar
antee".
I
ll
ust
rat
ion:Br
equest
sAt
osel
landdel
i
vert
ohi
m goodsoncr
edi
t.Aagr
eest
odoso,
prov
ided
Cwil
lguarant
eethepaymentoft
hepri
ceoft
hegoods.Cpromi
sest heguar
anteethepayment
i
nconsider
ati
onofA'spromi
setodel
i
vert
hegoods.Thi
sissuf
fi
cientconsi
der
ationforC'
s
pr
omise.
Sect
ion143:"
Guar
ant
eeobt
ainedbyconceal
menti
nval
i
d.Anyguar
ant
eewhi
cht
hecr
edi
tor
hasobt
ainedbymeansofkeepi
ngsi
l
enceast
omat
eri
alci
rcumst
ancesi
sinv
ali
d".
I
ll
ust
rat
ion:AengagesBascl
erkt
ocol
l
ectmoneyf
orhi
m.Bf
ail
stoaccountf
orsomeofhi
s
recei
ptsandAinconsequencescal
lsuponhum t
ofurni
shsecuri
tyf
orhisdul
yaccount
ing.C
giveshi
sguar
anteeforB'
sdulyaccounti
ng.Adoesnotacquai
ntCwithB'spr
evi
ousconduct.B
after
wardsmakesdefaul
t.Theguar
anteeisi
nval
id.
Ref
erences:
1)Busi
nessLaw(
6thedi
ti
on):
MCKuchhal
andVi
vekKuchhal
(Vi
kasPubl
i
shi
ngHouse,
Noi
da)
2)I
ndi
anCont
ractAct(
12t
hedi
ti
on):
RKBangi
a(Al
l
ahabadLawAgency
,Far
idabad)
3)I
ndi
anCont
ractAct(
12t
hedi
ti
on):
Avt
arSi
ngh(
East
ernLawAgency
,Noi
da)