Contracts of Guarantee
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What is a contract of guarantee as defined under the Indian 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. It involves three parties: the surety, the principal debtor, and the creditor.
What section of the Indian Contract Act, 1872 defines a contract of guarantee?
Section 126 defines contract of guarantee.
Who are the three parties to a contract of guarantee?
The three parties are the surety (person who gives the guarantee), the principal debtor (person whose default is guaranteed against), and the creditor (person to whom the guarantee is given).
What is the person who gives the guarantee in a contract of guarantee called?
The person who gives guarantee is called surety.
What is the primary distinction between a contract of guarantee and a contract of indemnity?
In a contract of guarantee, there are three parties and the surety's liability is secondary (collateral to the principal debtor's liability), whereas in indemnity, there are only two parties and the indemnifier's liability is primary.
What is the person in whose favour a bank guarantee is issued called?
The person in whose favour guarantee is issued is called beneficiary.
Can a contract of guarantee be oral under Indian law?
Yes, under the Indian Contract Act, 1872, a contract of guarantee may be either oral or written. There is no requirement that it must be in writing, unlike in English law.
What is the validity period typically prescribed for bank guarantees in India?
Bank guarantees are typically valid for a specified fixed period.
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