All India Bar Examination (AIBE) 6-VI Previous Year Question Papers with Answers

Practice Mode:
25.

A contract to perform the promise or discharge the liability of a third person in case of his default-is a contract of

A: Guarantee
B: Default
C: Indemnity
D: Partnership

The answer is: A

Explanation

The correct option is A: Guarantee.

A contract of guarantee is a contract in which one party (the guarantor) promises to pay or perform the obligation of another party (the principal debtor) in case of default. A contract of guarantee involves three parties: the principal debtor, the creditor, and the guarantor. The guarantor acts as a surety for the principal debtor and assures the creditor that the principal debtor will fulfill his promise or repay his debt. If the principal debtor fails to do so, the guarantor will be liable to the creditor.

A contract of guarantee is not a contract of default, indemnity, or partnership. A contract of default is not a legal term, but it may refer to a situation where one party fails to perform his contractual obligations and breaches the contract. A contract of indemnity is a contract in which one party (the indemnifier) agrees to protect another party (the indemnified) from any loss or damage that may arise from the performance of a contract or from any other cause. A contract of partnership is a contract in which two or more persons agree to carry on a business together and share its profits and losses.