CONTRACTS OF GUARANTEE AND BANK GUARANTEE
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Free sample — 8 of 65 rapid-fire Q&A cards.
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 their default. It involves three parties: the surety, the principal debtor, and the creditor.
What is the maximum liability of a surety in a contract of guarantee?
Co-extensive with principal debtor unless otherwise provided
Who are the three parties involved in a contract of guarantee?
The three parties are the surety (guarantor who gives the guarantee), the principal debtor (whose default is guaranteed), and the creditor (to whom the guarantee is given).
Under which act are contracts of guarantee in India governed?
Indian Contract Act, 1872
What is the difference between a specific guarantee and a continuing guarantee?
A specific guarantee covers a single transaction and is discharged once that transaction is complete. A continuing guarantee extends to a series of transactions and remains in force until revoked.
What is the role of a principal debtor in a contract of guarantee?
Person whose debt or default is guaranteed by the surety
Under what section of the Indian Contract Act is a contract of guarantee defined?
A contract of guarantee is defined under Section 126 of the Indian Contract Act, 1872.
What is meant by the term 'creditor' in a contract of guarantee?
Person to whom the guarantee is given for principal debtor's performance
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