The project covers
1. contract of Guarantee
2. contract of Indemnity
3. contract of Bailment
1. Contract of Guarantee
2. Contract of Indemnity
3. Contract of Bailment
CONTRACT OF GUARANTEE
Section 126 states,” 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 enables a person to get loans, goods on credit, employment etc. It may be oral or written. It is a promise to perform the promise of other, on his failure to do so.
The person who gives the guarantee is called the surety or guarantor. The person to whom the guarantee is given is called the creditor. The person in respect of whose default the guarantee is given is called the principal debtor.
Example. A requests B to lend Rs. 5 Lac to C. A guarantees that if C fails to return the loan, A will pay to B.
The following are essential features of guarantee:-
a. Tripartite Contract :
It is an agreement between the principal debtor, Creditor and surety. Three separate contracts exist among them. In a Tripartite contract, the liability of the surety arises if the promise by Principal debtor is not fulfilled. The principal contract exists between the Principal debtor and creditor and the secondary contract exists between the creditor and surety.
Example. X takes a loan of Rs. 5000 from Y on Guarantee of Z. The agreement between X and Y is principal contract and the contract between Y and Z is a contract of a guarantee. The liability of Z will arises if X fails to repay the loan.
b. Consideration :
Like other contracts, a contract of guarantee must fulfill essentials of a valid contract. It must be...