Contract of Guarantee and Bank Guarantee
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 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 his default. It involves three parties: the surety, the principal debtor, and the creditor.
What is the minimum number of parties required to form a valid contract of guarantee?
Three parties: surety, principal debtor, and creditor.
Who are the three parties involved in a contract of guarantee?
The three parties are the surety (person giving the guarantee), the principal debtor (person whose liability is guaranteed), and the creditor (person to whom the guarantee is given).
Who is referred to as the 'surety' in a contract of guarantee?
The person who gives the guarantee on behalf of the principal debtor.
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 completed, while a continuing guarantee extends to a series of transactions and remains in force until revoked.
Under which Act are contracts of guarantee governed in India?
Indian Contract Act, 1872, Section 126.
Under what circumstances can a surety revoke a continuing guarantee?
A surety can revoke a continuing guarantee as to future transactions by giving notice to the creditor, but remains liable for transactions already entered into before the notice.
What is the liability of a surety described as under Section 128 of the Indian Contract Act?
Co-extensive with that of the principal debtor.
Video classes for this chapter
Contract of Guarantee and Bank Guarantee Part 3
Contract of Guarantee and Bank Guarantee Part 2
Contract of Guarantee and Bank Guarantee Part 2
Contract of Guarantee and Bank Guarantee Part 3
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