Page 102 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes z The liability of the surety cannot be postponed till all other remedies against the principal
debtor have been exhausted.
z Contract of indemnity is a contract whereby one party promises to save the other from loss
caused to him (the promisee) by the conduct of the promisor himself or by the conduct of
any other person.
z The liability of the surety is co-extensive with that of the principal debtor.
z A surety is discharged from liability: (i) by revocation, (ii) by conduct of creditor, or (iii) by
invalidation of contract.

7.7 Keywords

Continuing guarantee: A guarantee which extends to a series of transactions.
Contract of guarantee: It is a contract to perform the promise, or discharge the liability, of a third
person in case of his default.
Contract of indemnity: It is a contract of indemnity is a contract whereby one party promises to
save the other from loss caused to him by the conduct of the promisor himself.

Co-surety: When a debt is guaranteed by two or more sureties, they are called co-sureties.
Creditor: The person to whom the guarantee is given.
Principal debtor: The person for whom the guarantee is given.
Specifi c guarantee: It extends to a single transaction or debt.
Surety: The person who gives the guarantee.

7.8 Self Assessment

State whether the following statements are true or false:
1. As per the Indian law, a contract of guarantee must be in writing.
2. Specific guarantee is different from continuing guarantee.

3. For a contract of guarantee, the primary liability is of the surety.

4. In the event of principal debtor being a minor, creditor cannot recover his money from the
surety.
5. The liability of a surety is secondary.
6. The surety is a favoured debtor.

7. Between co-sureties there is equality of burden and benefi t.
Fill in the blanks:
8. ............................. is a contract to perform the promise, or discharge the liability, of a third
person in case of his default.
9. ............................. is a contract of indemnity is a contract whereby one party promises to
save the other from loss caused to him by the conduct of the promisor himself.
10. ............................. is a guarantee which extends to a series of transactions.

11. When a debt is guaranteed by two or more sureties, they are called ............................. .

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