Question

Which of the following is not an essential of a contract of guarantee

• A. Concurrence of three parties
• B. Surety's distinct promise to be answerable
• C. Liabilities to be legally enforceable
• D. Existence of only one contract

Hint:

Visualize a contract of guarantee as a triangle with the Creditor, Principal Debtor, and Surety at the vertices. Each side of the triangle represents one of the three contracts that make up the whole arrangement.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
A contract of guarantee, as defined under Section 126 of the Indian Contract Act, 1872, is a contract to perform the promise, or discharge the liability, of a third person in case of his default. It has specific essential elements.

Step 2: Detailed Explanation:
Let's analyze the essentials of a contract of guarantee:
- (A) Concurrence of three parties: It involves three parties: the Principal Debtor, the Creditor, and the Surety. All three must concur. This is essential.
- (B) Surety's distinct promise: The core of the contract is the promise by the surety to be answerable for the debt or default of the principal debtor. This is essential.
- (C) Liabilities to be legally enforceable: There must be a primary liability or a debt which is legally enforceable. The surety's liability is secondary and co-extensive with this primary liability. This is essential.
- (D) Existence of only one contract: This is incorrect. A contract of guarantee involves three distinct contracts, even if some are implied: 1. The primary contract between the Principal Debtor and the Creditor. 2. The secondary contract between the Surety and the Creditor (the contract of guarantee). 3. An implied contract between the Surety and the Principal Debtor (the surety's right to be indemnified by the debtor).
Therefore, the existence of only one contract is not a feature; in fact, the opposite is true.

Step 3: Final Answer:
The statement "Existence of only one contract" is not an essential of a contract of guarantee, as it is composed of three separate contracts.