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LEGAL AND REGULATORY ASPECTS OF BANKING (LRAB)
Unit - 42: Contacts of Guarantee
Legal & Regulatory Aspects of Banking -
Unit - 42 : Contracts of Guarantee
Contract means an agreement enforceable by law. There must be lawful proposal by one party and the other party must accept the proposal to enter into a contract.
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 Contract of Guarantee is applicable in banking products like performance guarantee, Financial Guarantee, Co- acceptance , etc .
Banks generally obtain guarantee as a form of collateral for a debt. All these examples where a contract of guarantee applies .
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 whom the guarantee is given is called the creditor / beneficiary .
A guarantee which extends to a series of transactions is called a continuing guarantee.
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