JAIIB LRAB Unit 42 - Contracts Of Guarantee

A 'Contract of Guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of latter's default. A guarantee may be either oral or written. The question whether a particular contract is a contract of indemnity or guarantee has to be decided by examining the language of the documents entered into between the parties and the nature of transaction.

PARTIES TO THE CONTRACT

The person who gives the guarantee is called the 'surety'. 

The person in respect of whose default the guarantee is given is called the 'principal debtor'.

The person to whome the guarantee is given is called 'creditor/beneficiary'.