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Guarantee. A contract under which a surety (the guarantor) promises to be responsible for the performance of an obligation owed by a principal obligor to a third party if the principal obligor fails to perform the obligation. The guarantor's liability under a guarantee is a secondary liability, as the guarantor is not liable unless and until ...
- Guarantees and indemnities: a quick guide | Practical Law
This document is from Thomson Reuters Practical Law, the...
- Guarantees and indemnities: a quick guide | Practical Law
A contract of guarantee is an accessory contract by which the promisor (i.e., the guarantor or surety) undertakes to accept liability on behalf of the promissee (i.e., creditor) for the debt, default or miscarriage of another person, whose primary liability to the promisee must exist or be contemplated. A valid guarantee requires an agreement ...
- Research Methodology
- Formatting Styles
- Facts of The Case
- Judgment of The Supreme Court
- Ratio Decdendi of The Decision and Analysis
- Amount of Guarantee A Material Alteration?
- Is The Appellant, M.S. Anirudhan Discharged Because of Such An Alteration?
- B. Criticism of The Judgment
- Conclusion
The researcher here has adopted doctrinal method of research, with the NALSAR library and internet being the main sources of information. Also an effort has been made to critically analyze the decision in the instant case in the light of the good law given both by the Act and the decisions of the common law courts.
The researcher has followed the style of formatting given by Dr. Vijender Kumar, Professor of Law, NALSAR University of Law, Hyderabad.
The appeal in the Supreme Court arose out of a suit filed by one Thomco’s Bank in Trivandrum against the appellant N.S. Anirudhan and one V. Sankaran in the trial court. The suit was based against V. Sankaran on a promissory note executed by him in favour of the Bank on February 24, 1947 and against the present appellant on a letter of guarantee da...
In the instant case, M. Hidayatullah and J.L. Kapur JJ held that the alteration in the letter of guarantee was not material or substantial and will not amount to discharge of the surety from his obligations under the letter. However A.K. Sarkar J dissented and held that the alteration would amount to discharge of the surety from his obligations. Th...
Kapur J reasoned that since the surety is not discharged from his obligations he entrusts the letter of guarantee to the principal debtor by himself and the principal debtor makes any alteration in such a letter, such a condition squarely applies to this case. Here Anirudhan, the appellant, entrusted his letter of guarantee to the principal debtor ...
It is a principle of common law that any variance made in the absence of the consent of the surety, in the contract of guarantee will result in discharge of the surety. As quoted in the instant case, in the early case of Pigots, it was resolved that in case there is alteration in the document of guarantee, the surety can plead that the document ha...
Now remains the question as to whether the appellant Anirudhan could be discharged from his obligations as a surety because of such alteration. It is to be seen that in order to discharge the surety from his obligations under the contract of guarantee it is necessary that the alterations must be made without his consent, whether express or implied....
There is always one criticism which is attached to this decision. Interestingly this case was not decided on the law laid down in Section 133 of the Act. In fact the decision nowhere refers to Section 133 of the Act. The case has been decided on principles of common law and not on the law laid down in the said section. The law in Section 133 of the...
It is necessary to note, as a concluding point, that this decision laid down the law for the interpretation of the principle of discharge of surety by variance in the terms of the contract of guarantee. In spite of the criticism above, the interpretation of the rule of discharge of surety, as laid down in this judgment is still a good law. This in ...
The liability under a contract of indemnity is (as further explained below in the context of discussing demand guarantees) wholly independent of the liability (if any) that arises between the parties to the underlying contract.6 A demand guarantee is a good example of a contract of indemnity. It is a type of payment bond (similar, in some
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Feb 26, 2021 · Both a guarantee and an indemnity involve a contractual undertaking given by a party to pay the beneficiary based on the failure of the principal to perform their contractual obligations. These are both a form of a contract of suretyship. In the case of a guarantee, the obligor has a secondary obligation to the beneficiary, which is based on an ...
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A guarantee: •. is a promise by the guarantor to the Beneficiary that a third party (the primary obligor) will perform an obligation, and/or if the third party does not perform, the guarantor will perform it or procure its performance. •. creates a secondary obligation (ie an obligation dependent on the primary obligor’s obligation), and.
