what is contract of guarantee. It's types and features.

what is contract of guarantee. It's types and features.

Contract of guarantee is a legal contract in which a person promise to third person for paying and takes responsibility to pay in case on his default. There is a term which are used in contract of guarantee. Guarantee maybe either oral or written. 

Surety :-The person who gives the guarantee

Principal-debtor :- the person in respect of whose default the guarantee is given. 

Creditor :- the person to whom the guarantee is given. 

Ex. Aman asks kamal to give a loan of 10,000 to Praveen. And give him shorty that if Praveen will not return your money then Aman will pay 10000 rupees to Kamal. 

In the example

In the contract of guarantee it is very important to note that mention three separate contract one between the principal and debtor and creditor second between the creditor and the security and third between the security and the principal director. 

Kinds of guarantee

There are two kinds of guarantee

1.Simple or specific guarantee:- specific or simple guarantee is a guarantee which is given in respect to a single debt aur specific transaction and it is to come and end when the guarantee debt is paid or the promise is performed. 

 

2.continuing guarantee :- according to Section 129 of the Contract Act " continuing guarantee is a series of transactions", in this guarantee several transactions are moving on continuously. In the continuing guarantee the charity is liability will continue till all the transactions are complete or till the guarantee is revolved by the person for the transaction. 

Features of the contract of guarantee

A contract of guarantee is a part of general contract hence all essential of valid contract must be present in contract of guarantee. Here we will discuss about some more main features of the contract of guarantee. 

1. Separate consideration for guarantee is not required :- in the contract of guarantee there is no need to contract between principal debtors and security, though consideration is necessary for the contract of guarantee in this contract creditor is sufficient consideration for surety for principal debtor. 

2.obligation of surety depends on principal debts or default:- in the contract of guarantee a person who take surety is responsible to pay only if the principle debtor is in default if the principal debtor does not do any default then the security is not responsible to pay. If promise is not conditional, it cannot be said a contract of guarantee. 

3. principle debtor need not be competent to contract :- in the contract of guarantee the principal debtor need not be competent to contract, though the creditor and the security must be capable of entering into contract, in Such condition the surety is liable as the principal director not principal doctor. 

4.their must be existing debt or promise whose performance is guaranteed:- dear must be an existing dab or promise whose performance is guarantee in the contract of guarantee. If there is no any depot promise in the contract of guarantee then it cannot be valid guarantee.