Guaranty, Or Guarantee
Legal definition for Indian law research
Definition
Guaranty, or Guarantee, a promise to a person to be answerable for the payment of a debt or the performance of a duty by another, in case he should fail to perform his engagement. An offer to guarantee until it be accepted is not binding. At Common Law a guarantee need not have been in writing, but the Statute of Frauds (29 Car. 2, c. 3), s. 4, enacts that 'No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriages of another person, unless the agreement upon which such action shall be brought, or some memoran-dum or note thereof, shall be in writing, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized.' In case of guarantees, great inconvenience had resulted from the construction put upon the above s., viz., that the consideration for the promise of the guarantor must appear upon the written instru-ment. To remedy this, the Mercantile Law Amend-ment Act, 1856 (19 & 20 Vict. c. 97), provides that no promise to answer for the debt, etc., of another is to be deemed invalid to support an action, by reason that the consideration does not appear in writing (s. 3). By s. 18 of the Partnership Act, 1890 (53 & 54 Vict. c. 39), which takes the place of s. 4 of the same Act, 'a continuing guaranty given either to a firm or to a third person in respect of the transactions of a firm is, in the absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which or of the firms in respect of the transactions of which, the guaranty was given', See McCall v. Hargreaves, (1932) 2 KB 423.
For the Statute of Frauds to apply, the party whose debt is guaranteed must himself remain liable, Birkmyr v. Darnell, (1705) Salk 27; 1 Sm LC. The contract of a del credere agent is not within the statute; see Harbury Indiarubber Co. v. Martin, (1902) 1 KB 778. A contract of guarantee is one of con-siderable nicety, and a surety will not be held bound beyond the strict terms of his undertaking; an apparently small variation will often release him, e.g., he will be discharged if his rights against the debtor are affected, disturbed or destroyed by any agreement between the creditor and debtor without his privity, such as if time is given by the creditor to the principal debtor, Bolton v. Buckenham, (1891) 1 QB 278. For forfeiture of shares by a debtor whose payments have been guaranteed by a surety [Re Darwen and Pearce, (1927) 1 Ch 176], and for circumstances in which the guarantor for a lessor, contemplating assignment, was not dis-charged by assignment, see Johnson Bros. (Dyers), Ltd. v. Davison, 79 Sol Jo 306. The guarantor, as a rule, has the right of subrogation or to step into the shoes of the creditor to the extent of the discharge of the debtor part of it by the guarantor. See INDEMNITY. Consult De Colyar on Guarantees; Leake or Chitty on Contracts
For the Statute of Frauds to apply, the party whose debt is guaranteed must himself remain liable, Birkmyr v. Darnell, (1705) Salk 27; 1 Sm LC. The contract of a del credere agent is not within the statute; see Harbury Indiarubber Co. v. Martin, (1902) 1 KB 778. A contract of guarantee is one of con-siderable nicety, and a surety will not be held bound beyond the strict terms of his undertaking; an apparently small variation will often release him, e.g., he will be discharged if his rights against the debtor are affected, disturbed or destroyed by any agreement between the creditor and debtor without his privity, such as if time is given by the creditor to the principal debtor, Bolton v. Buckenham, (1891) 1 QB 278. For forfeiture of shares by a debtor whose payments have been guaranteed by a surety [Re Darwen and Pearce, (1927) 1 Ch 176], and for circumstances in which the guarantor for a lessor, contemplating assignment, was not dis-charged by assignment, see Johnson Bros. (Dyers), Ltd. v. Davison, 79 Sol Jo 306. The guarantor, as a rule, has the right of subrogation or to step into the shoes of the creditor to the extent of the discharge of the debtor part of it by the guarantor. See INDEMNITY. Consult De Colyar on Guarantees; Leake or Chitty on Contracts
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