KASHIBA V. SHRIPAT
(1895) 19 ILR Bom. 697
Bombay High Court.
Section 126 of The Indian Contract Act 1872 ‘contract of guarantee ‘is being discussed here. The contract of guarantee is a contract to perform the promise or discharge liability of a third person in case of his default. The essentials of a contract of the guarantee are:
– Existence of a tripartite agreement between the principal debtor, creditor, and surety.
– Essentials of the valid principal debt.
– Lastly, it must satisfy essentials of the valid contract, such as valid offer and acceptance, age of majority, free consent, the legality of the object, etc must be satisfied.
The case is about whether the contract of guarantee will be valid even if the principal debtor is not competent to contract.
A minor named Laxmibai entered into a bond to secure payment to the plaintiff for Rs 1000. But at the time of execution, she was a minor and her father joined in the bond as a surety and said that under a contract, if she fails to pay, he will pay the above-mentioned amount without pleading her excuse and take back this bond. And if not so paid, they should get it paid off his income. The question was whether the father was liable on this guarantee in the view of Laxmibai herself not being liable because of her minority. in this case, the contract of so-called surety is not collateral, but a principal contract. It is a conditional promise founded upon a valuable consideration.
The court held the father liable for the payment and said in cases like this the surety does not just act as collateral but becomes the principal debtor. In circumstances where the principal debtor is not competent to contract, the surety will act as principal debtor and will be held for payment of debt personally. And there is no reason why a person couldn’t guarantee the performance of a third person by a duty of imperfect obligation.