This document discusses the topics of contract of guarantee and bailment under commercial law. It defines a contract of guarantee as a contract to perform the promise or discharge liability of a third person in case of their default. It notes there are three parties involved - the principal debtor, creditor, and surety. Bailment is defined as the delivery of goods by one person to another for a specific purpose, to be returned after. It notes the person delivering the goods is called the bailor and the person receiving is called the bailee. The duties and rights of bailors and bailees are also outlined.

1. Commercial law – Unit IV
Karthikeyan R
Assistant Professor
Department of Commerce with Computer Applications
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with A++ Grade (3nd Cycle – 3.64 CGPA)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100

2. Contract of Guarantee
A contract of guarantee is a contract to perform the
promise, or discharge of liability, of a third person in
case of his default.
A guarantee may be either Oral or Written.
- Section 126 Indian contract Act
.
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COIMBATORE | INDIA

3. Dr. NGPASC
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Contract of Guarantee is a specific performance
contract. It is called specific performance because it is an
equitable relief.

4. Dr. NGPASC
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Persons Involved in Contract of Guarantee
In a Contract of Guarantee there are three separate
agreements
One between the Principal debtor and the creditor.
The Second between the creditor and the surety
The Third between the Surety and the Principal debtor

5. Ex:
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6. Difference Between Indemnity and Guarantee
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7. Essentials of Contract of Guarantee
Three Parties
Three Contracts
The Contract must be written in terms of English Law. In other
words, Contract maybe Written or Oral.
Contract of Guarantee, like every other contract, must satisfy all the
essential elements of a valid contract.
Secondary liability of Surety. Existence of Two liabilities. – Primary
Liability, Secondary Liability.
Contract of Guarantee without surety is Void.
Its an undertaking to perform the promise of other on his failure to
do so.
Dr. NGPASC
COIMBATORE | INDIA

8. Bailment
A bailment is the delivery of goods by a person to another
for definite purpose, on the condition that after the purpose is
accomplished the goods must be returned.
Common examples of bailment are hiring of goods,
furniture or cycle etc.
Bailment is a legal relationship in common law, where the
owner transfers physical possession of personal property
("chattel") for a time but retains ownership.
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9. Bailment
A bailment is the delivery of the goods by one person to
another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the persons
delivering them.
-Section 148 of the Indian Contract Act
The person delivering the goods is called BAILOR
The person to whom they are delivered is called BAILEE
This transaction is called BAILMENT
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10. Bailment
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11. Bailment
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12. Bailment
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13. Distinction
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14. Duties of Bailor
To disclose known defects
To bear Expenses (Gratuitous)
To bear Extra – Ordinary Expenses ( Non – Gratuitous)
To receive back the goods
To indemnify the bailee
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15. Rights of Bailor
Claim damage against bailee’s negligence
Right of termination
Claim for damages against unauthorized use
Compensation unauthorized mix
Entitled to get back the goods
To enforce duties of bailee
Right to claim accretion to goods
Right to sue against wrongdoers
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16. Duties of Bailee
To take care of goods bailed
Not to make unauthorized use
To return the goods bailed
Not to mix the goods with his own
To deliver accretion to goods
Not to setup adverse title
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17. Rights of Bailee
To claim damages
To claim reimbursement
To recover losses
To deliver the goods any one from joint bailors
To give the goods to bailor even if the tittle is defective
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