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Test: Continuing Guarantee - Judiciary Exams MCQ


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10 Questions MCQ Test - Test: Continuing Guarantee

Test: Continuing Guarantee for Judiciary Exams 2024 is part of Judiciary Exams preparation. The Test: Continuing Guarantee questions and answers have been prepared according to the Judiciary Exams exam syllabus.The Test: Continuing Guarantee MCQs are made for Judiciary Exams 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Continuing Guarantee below.
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Test: Continuing Guarantee - Question 1
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Why is it essential for individuals involved in financial transactions to differentiate between Specific Guarantee and Continuing Guarantee?

Detailed Solution for Test: Continuing Guarantee - Question 1
Distinguishing between a Specific Guarantee and a Continuing Guarantee is vital in financial transactions as it delineates the legal responsibilities and liabilities of the parties involved. Understanding this difference helps individuals assess the extent of their financial obligations and the duration for which they are bound by the terms of the guarantee. This knowledge is fundamental for making informed decisions and managing risks effectively in financial dealings.
Test: Continuing Guarantee - Question 2
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What is the key characteristic of a Continuing Guarantee as defined in Section 129 of the Indian Contract Act?

Detailed Solution for Test: Continuing Guarantee - Question 2
A Continuing Guarantee, as per Section 129 of the Indian Contract Act, extends across multiple transactions within a specified time frame even after the discharge of individual obligations. This type of guarantee persists and can be limited by time or amount, offering ongoing assurance to the creditor. It is crucial for the Surety to understand the scope and duration of their commitment in such agreements.
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Test: Continuing Guarantee - Question 3
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In a Contract of Guarantee according to Section 6 of the Indian Contract Act, which parties are involved?

Detailed Solution for Test: Continuing Guarantee - Question 3
A Contract of Guarantee under Section 6 of the Indian Contract Act involves three key parties: the Surety, who provides the guarantee, the Principal Debtor, who is primarily responsible for the obligation, and the Principle Creditor, who is the recipient of the guarantee. Understanding the roles and responsibilities of each party is essential in guarantee agreements to ensure clarity and legal validity.
Test: Continuing Guarantee - Question 4
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What distinguishes a Specific Guarantee from a Continuing Guarantee in contract law?
Detailed Solution for Test: Continuing Guarantee - Question 4
In contract law, a Specific Guarantee is specifically tailored to a particular transaction or debt and terminates once that transaction is completed. On the other hand, a Continuing Guarantee extends beyond a single transaction, maintaining liability even if multiple transactions occur. This distinction is crucial in understanding the scope and duration of obligations under different types of guarantees.
Test: Continuing Guarantee - Question 5
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Under what circumstances does a contract in a guarantee become invalid and void?
Detailed Solution for Test: Continuing Guarantee - Question 5
A contract in a guarantee becomes invalid and void if it is based on fraud or misrepresentation by the creditor, involving material circumstances or the concealment of important facts. In such cases, the contract is considered null and void from the beginning, and the guarantor may not be held liable for any obligations outlined in the fraudulent or misrepresented contract. This provision protects guarantors from being bound by contracts that were entered into deceitfully.
Test: Continuing Guarantee - Question 6
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What happens when a guarantor pays the debt in a guarantee contract?
Detailed Solution for Test: Continuing Guarantee - Question 6
When a guarantor pays the debt in a guarantee contract, they step into the shoes of the creditor and acquire all the rights the creditor had over the principal debtor. This means that the guarantor essentially steps into the position of the creditor in terms of rights related to the debt. This provision ensures that the guarantor has the ability to pursue the debtor for the amount paid on their behalf.
Test: Continuing Guarantee - Question 7
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What does Section 128 of the Indian Contract Act, 1972 specify about the liability of a Surety in a continuing guarantee?
Detailed Solution for Test: Continuing Guarantee - Question 7
Section 128 of the Indian Contract Act, 1972 establishes that the Surety's liability in a continuing guarantee is on par with that of the Principal Debtor. This means that the Surety is equally responsible for any obligations arising from transactions between the Creditor and the Principal Debtor, unless stated otherwise in the contract. It is crucial for the Surety to comprehend that their liability is interconnected with the contract terms, and if the Principal Debtor is not held accountable, the Surety will not be held accountable either.
Test: Continuing Guarantee - Question 8
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How can a Surety be released from their liability in a continuing guarantee arrangement?
Detailed Solution for Test: Continuing Guarantee - Question 8
A Surety in a continuing guarantee can be freed from their liability by revoking their guarantee. This action serves as a formal way for the Surety to withdraw from their obligation under the guarantee agreement. It's important to note that this revocation process needs to be done in accordance with the terms specified in the contract. Once the guarantee is revoked, the Surety's responsibility for future transactions or dealings under the guarantee ceases.
Test: Continuing Guarantee - Question 9
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In a Continuing Guarantee, what action can the Surety take to revoke the guarantee for future transactions?
Detailed Solution for Test: Continuing Guarantee - Question 9
The Surety in a Continuing Guarantee can typically revoke the guarantee for future transactions by providing notice to the Creditor. This step allows the Surety to formally communicate their decision to no longer be held accountable for upcoming obligations between the Creditor and the Principal Debtor. Notifying the Creditor is a crucial aspect of revoking a Continuing Guarantee, ensuring clarity and legal acknowledgment of the Surety's intent to terminate their liability for future dealings.
Test: Continuing Guarantee - Question 10
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What characteristic distinguishes a Continuing Guarantee from a Specific Guarantee in contract law?
Detailed Solution for Test: Continuing Guarantee - Question 10
A Continuing Guarantee differs from a Specific Guarantee by remaining effective even after the fulfillment of a single obligation. This means that the Surety remains responsible for a series of transactions with the Principal Debtor, extending beyond a single debt or transaction. This distinction highlights the ongoing nature of the Surety's liability in a Continuing Guarantee, ensuring creditor protection and accountability for future dealings.
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Continuing Guarantee MCQs with Answers

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