Section 143 The Indian Contract Act, 1872
Section 143 of the Indian Contract Act, 1872 states:
Section 143 – Guarantee obtained by misrepresentation invalid
Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.
Explanation:
If a creditor misrepresents important facts (either directly or knowingly allows misrepresentation) to the surety (guarantor), and the surety gives the guarantee based on that misrepresentation, the guarantee is not valid in law.
Key Points:
The misrepresentation must be material (i.e., important to the surety's decision).
The misrepresentation must be by the creditor or with his knowledge/consent.
Protects the surety from being bound by fraudulent or misleading assurances.
Illustration:
B tells A that C is very trustworthy and has never defaulted, knowing this is false. Based on this, A guarantees C's loan. Later, C defaults. Since the guarantee was based on misrepresentation by B, it is invalid under Section 143.
=
RELATED Blog
0 comments