Law related to Bank Guarantee

Ans: Section 126 of Indian  Contract Act mentions about Contract of guarantee’, ‘surety’, ‘principal debtor’ and ‘creditor'. 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 person who gives the guarantee is called the ‘surety’. If bank gives the guarantee,  the bank will be surety ; the person in respect of whose default the guarantee is given is called the ‘principal debtor’ as well as the person to whom the guarantee is given is called the ‘creditor’. A guarantee may be either oral or written.  x x

Ans: Contingent liability is the liability of any uncertain event in future. A contingent liability is defined as  a liability which may arise depending on the outcome of a specific event .  x

Ans: Contingent liability is the liability of any uncertain event in future. A contingent liability is defined as a liability which may arise depending on the outcome of a specific event .  x

Ans: Amy as well as Rosa got approved for Rs 25,00000 construction loan but have only drawn down Rs 10,00000 so far. They will only be charged interest on amount of Rs 10,00000. The draw down loan is Rs 10,00000 and total loan is Rs 25,00000. If later in the construction stages Amy and Rosa draw Rs 18,00000( 10,00000+8,00000) for the next phase of the construction, then there will be charged interest on Rs 18,00000.