Section 79
Section 79
A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. 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” and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.
Contracts
B.L.R.O. 3/2023 55
Consideration for guarantee 80.
Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.
Illustrations
(a)
B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is a sufficient consideration for C’s promise.
(b)
A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C’s promise.
(c)
A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.
Surety’s liability 81.
The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.
Illustration
A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill but also for any interest and charges which may have become due on it.
“Continuing guarantee”