Understanding the Contract of Guarantee
The contract of guarantee is a crucial element in financial and commercial transactions. It serves as a security measure that ensures one party's obligations are fulfilled by another.
Forms of Guarantee
- Written or Oral: The contract can be established in both written and oral forms. This flexibility allows parties to engage in agreements based on their convenience and circumstances.
- Legal Validity: Both written and oral guarantees are legally acceptable, provided they meet the essential elements of a contract, such as offer, acceptance, and consideration.
Importance of Written Guarantees
- Clarity and Certainty: Written guarantees provide clear terms and conditions, reducing the chances of disputes and misunderstandings.
- Evidence in Court: In case of conflicts, written documents serve as concrete evidence, making it easier to enforce the guarantee.
Role of Oral Guarantees
- Informal Agreements: Oral guarantees can be useful in informal business settings where trust and personal relationships play a significant role.
- Limitations: However, oral agreements are harder to prove, which can lead to complications if a dispute arises.
Conclusion
In conclusion, the contract of guarantee should be recognized as "written or oral" (option D) because it encompasses both forms. While written contracts are preferred for their clarity, oral agreements also hold validity, reflecting the adaptable nature of contractual obligations in different contexts.

• Definition: A contract of guarantee is a contract where a person agrees to perform the promise or discharge the liability of a third person in case of his default.



• Types of Guarantee: There are two types of guarantees - Specific Guarantee and Continuing Guarantee.



• Requirement of Writing: As per the Indian Contract Act, 1872, a contract of guarantee must be in writing, or evidenced by some written memorandum, signed by the surety.



• Oral Guarantee: While the general rule is that a guarantee must be in writing, there are exceptions where an oral guarantee can be valid such as in cases of emergency or when the guarantee is for a short period.



• Validity: A contract of guarantee, whether written or oral, is legally binding and enforceable as long as it meets the necessary legal requirements.