Section 143 of the Indian Contract Act, 1872 – Guarantee obtained by concealment invalid

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Section 143: Guarantee obtained by concealment invalid

Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances, is invalid. Illustrations

  • (a) A engages B as clerk to collect money for him. B fails to account for some of his receipts, and A in consequence calls upon him to furnish security for his duly accounting. C gives his guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.
  • (b) A guarantees to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B and C have privately agreed that B should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is concealed from A. A is not liable as a surety.

Source: official text of The Indian Contract Act, 1872 as published on India Code (PDF). All sections of the Indian Contract Act, 1872.

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