Guarantee
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Guarantee

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Guarantee Guarantee Presentation Transcript

  • INDEMNITY AND GUARANTEE
  • Indemnity A contract of indemnity is special contract. Indemnity means protect from loss. According to section 124 the contact by which one party promise to save the other from the loss caused to him by the conduct of the promisor himself or by the conduct of any other person is called a “contract of indemnity” The person who promise to make good the loss is called the indemnifier (Promisor)and the person whose loss is to be made good is called the indemnified or indemnity-holder (promisee) For example-A and B go into a shop .B says to the shopkeeper , “Let A have the goods ,I will see that you are paid”. The contract is one of indemnity
  • Contracts of Guarantee The term guarantee may be defined as an undertaking by one person to pay the amount due from another person A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. Eg – A lends money to B and C promises A that if B fails to repay he will pay the money.3
  • Continued… • 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 “. • The person to whom the guarantee is given is called the "creditor“. • A guarantee may be either oral or written.4
  • Essentials of a Guarantee1. There must be a debt existing, which should be recoverable.2. Existence of 3 parties ie. Principal debtor, creditor & surety.3. There should be some consideration4. The liability must be legally enforceable.5
  • Continued… 5. The principal debtor must be primarily liable. Surety’s liability is secondary. 6. There must be a distinct promise, oral or written by the surety to pay the debt in case of default by principal debtor. 7. All essentials of a contract.6
  • Kinds of Guarantee Specific and simple guarantee Continuing guarantee
  • Revocation of continuingguarantee By Notice (section130) By death of surety(section 131)
  • Rights of the surety Right against the principal debtor Right against the creditor-Right to claim securities, setoff, Right against co –sureties-Right to contribution
  • Rights of Surety• Rights of Subrogation (Right of surety against principal debtor).- When the surety pays gauranted sum to creditor on behalf of principal debtor, he owns all the rights of the Creditor.• Rights to indemnity - Surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but, no sums which he has paid wrongfully 10
  • Discharge of surety from liability By notice By death By release or discharge of principal debtor By promise not to sue the principal debtor By invalidation of contract of guarantee By giving more time to the principal debtor By change in term of contract