Essential Characteristics of Contract of Guarantee and Kinds

 

What are the essential characteristics of contract of guarantee and kinds?

A contract of guarantee is a type of contract where one party (the guarantor) agrees to take on the responsibility of paying a debt or fulfilling an obligation if the principal debtor fails to do so. Here are the essential characteristics and kinds of contracts of guarantee:

Essential Characteristics

1. Tripartite Agreement: Section 126 - A contract of guarantee is a tripartite agreement between the principal debtor, the creditor, and the guarantor.
2. Secondary Liability: Section 128 - The guarantor's liability is secondary to that of the principal debtor.
3. Consideration: Section 127 - The guarantor must receive consideration for their guarantee.

Kinds of Contracts of Guarantee
1. Specific Guarantee: Section 129 - A guarantee that is limited to a specific debt or obligation.
2. Continuing Guarantee: Section 130 - A guarantee that covers all future debts or obligations of the principal debtor.
3. Limited Guarantee: Section 131 - A guarantee that is limited to a specific amount or extent.
4. Unlimited Guarantee: Section 132 - A guarantee that is unlimited in amount or extent.
5. Joint Guarantee: Section 133 - A guarantee provided by two or more guarantors jointly.
6. Several Guarantee: Section 134 - A guarantee provided by two or more guarantors separately.

Other Types of Guarantees
1. Contract of Indemnity: Section 124 - A contract where one party agrees to compensate another party for any losses or damages.
2. Contract of Suretyship: Section 126 - A contract where one party agrees to take on the responsibility of paying a debt or fulfilling an obligation if the principal debtor fails to do so.