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CMA Intermediate · Business Laws and Ethics · Special Contracts - Indemnity and Guarantee; Bailment and Pledge; Laws of Agency

Under the Indian Contract Act, 1872, which statement about the form of a contract of guarantee is correct?

A contract of guarantee may be either oral or written. The Indian Contract Act, 1872 states this in the definition of guarantee, so neither writing, signature nor registration is a condition of validity, and the principal debtor need not be a party.

  1. AIt must be in writing and signed by the surety
  2. BIt may be either oral or writtenCorrect
  3. CIt must be in writing and registered
  4. DIt is valid only if the principal debtor is a party to it

Explanation

The Act defines a contract of guarantee and says expressly that a guarantee may be either oral or written. Writing, signature or registration is not required by the definition, so the options requiring them are wrong.

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