CS Executive · Jurisprudence, Interpretation and General Laws · Contract Law
Kiran orally tells a bank, 'If Anil fails to repay the loan you give him, I will pay it.' The bank lends to Anil. Which statement is correct under the Indian Contract Act, 1872?
The guarantee is valid. Section 126 says a contract of guarantee may be either oral or written, so Kiran's oral promise to discharge Anil's liability on his default binds him as surety even without any writing.
- AThe guarantee is invalid because a guarantee must be in writing
- BThe guarantee is valid, since a guarantee may be oral or writtenCorrect
- CThe guarantee is valid only if Anil also signs it
- DThe guarantee is invalid because Kiran is not the debtor
Explanation
Section 126 states that a guarantee may be either oral or written. Kiran is the surety, Anil the principal debtor and the bank the creditor. Writing is not required, so the first option is wrong.
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