According to the syllabus of B.com 1st year Prepared by- Ms. Neetu Kushwaha Research Scholar Department of Commerce

1. CONTRACT OF GUARANTEE
Course Co-Ordinator:
Ms. Neetu Kushwaha

2. Contract of Guarantee
Sec. 126- Sec. 147
• According to Sec. 126, “A
Contract of a guarantee is a
contract to perform the promise or
to discharge the liability of a third
person in case of his default.”

3. Parties to Contract
PRINCIPAL DEBTOR
SURETY
CREDITOR

4. Principal Debtor
• The person who makes default or the
person in respect of whose default
the guarantee is given is said to be
Principal Debtor.

5. Creditor
• The person who lend money to
principal debtor or the person to
whom the guarantee is given is called
as the Creditor.

6. Surety
• The person who gives guarantee to
creditor on the behalf of principal debtor is
called as Surety.

7. Parties to Contract
PRINCIPAL DEBTOR
SURETY
CREDITOR
1
2
3

9. Absolute & Conditional
Guarantee
• An Absolute guarantee is one by which the
guarantor (surety) unconditionally promises
payment or performance of the contract on
default of principal debtor.
• A Conditional guarantee is one which is not
enforced immediately on the default of the
principal debtor, but some contingency other
than such default must happen.

10. Retrospective & Prospective
Guarantee
• A guarantee given for an existing debt
or obligation is called Retrospective
guarantee.
• A guarantee given for future debt or
obligation is called a Prospective
guarantee.

11. General & Specific Guarantee
• A General guarantee is one for
acceptance by the public generally. It is a
general promise to any one accepting it to
answerable for a debt in case of the failure
of another person.
• A Specific guarantee is one which is
addressed to a particular person who
alone can take advantage of it and to
whom alone the guarantor can be held
responsible.

12. Limited & Unlimited Guarantee
• A Limited guarantee is ordinary
one restricted to a single
transaction.
• A Unlimited guarantee is one
which is unlimited as to time or
transaction.

13. Continuing Guarantee
• It means a guarantee which is
extends to a series of
transactions. It is not limited to a
single transaction. It is generally
for an indefinite time or until the
end of the guarantee.

14. Essentials of a Contract of
Guarantee
• Three Parties
• Three Contract
• Capacity to contract
• Consent
• Free Consent (sec. 142 & sec. 143)
• Debt or liability

15. Cont.….
• Consideration (B/w principal
debtor & Creditor) (sec.127)
• Writing not necessary (sec.126)
• Other essentials of a contract.