AD-FREE CAclubindia and Daily Mobile Updates. Subscribe Now!

Gimi a sitable example from the chapter indemnity.

27 September 2008

i am confuse about Surety, creditor and Principal debtor........ Please provide me some suitable guud example so that i may clear the concept.......I am talking about indemnity and Guarantee chapter.....

thanks for your post in advance

Reply
Follow
Share

4 Replies

Rahul Gupta (CA Final Student) (1785 Points)
Replied 27 September 2008

Dear Nitin,

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", the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.

For eg:

You have to take a loan from bank.

Then you would be a principal debtor because you want to take loan.

The bank would be a creditor as it provides loan.

But, as we know there is a requirement of guarantee for the purpose of loan. so your father who has a account in the bank and since he has a good relation with the bank or he has high repute gives gurantee that in case u make default in payment of loan...he shall pay the same..so he becomes surerty...!

I hope you are clear.

Regards

Rahul Gupta

Nitin Moudgil (~) (694 Points)
Replied 27 September 2008

thanks man u rock m much clear now

Joshi Radhesh K. ( student of pcc) (44 Points)
Replied 27 September 2008

Originally posted by :Nitin Moudgil

hi, dear igive u one example so u can uderstand it

x borrowed money frm y and b give the suriety to y of x in this example x is principle debtor & y is creditor & b is suriety.

thanks for your post in advance