Contract Act, 1872 Section 143 | Guarantee obtained by concealment invalid.

Contract Act, 1872 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.