Short Answer
A specific guarantee is a type of contract of guarantee that is given for a single transaction or a particular obligation. Once that specific transaction is completed or the obligation is fulfilled, the guarantee automatically comes to an end.
In simple words, it is a one-time guarantee. The surety is responsible only for one particular deal, and after that, he has no further liability.
Detailed Explanation
Specific Guarantee
A specific guarantee is one of the important types of guarantee under the Indian Contract Act, 1872. It is a guarantee that is limited to a single transaction or a specific obligation. The liability of the surety exists only for that particular transaction and ends when the obligation is completed.
In simple terms, a specific guarantee is a one-time promise. The surety agrees to take responsibility only for a particular deal between the creditor and the principal debtor. Once the deal is successfully completed, the guarantee is discharged.
For example, if A takes a loan from a bank and B guarantees that loan, B’s responsibility ends once A repays the loan. This is a specific guarantee.
Features of Specific Guarantee
- Limited to One Transaction
A specific guarantee is given for only one transaction or obligation. It does not cover multiple or future transactions.
This makes the guarantee simple and easy to understand.
- Ends After Completion
The guarantee comes to an end automatically when the transaction is completed or the debt is repaid.
There is no need for any special action to cancel it.
- Definite Liability
The liability of the surety is clear and fixed. It is limited only to the specific transaction mentioned in the contract.
This reduces confusion and legal disputes.
- No Continuing Obligation
Unlike a continuing guarantee, a specific guarantee does not extend to a series of transactions. It applies only once.
This means the surety has no long-term responsibility.
- Simple and Clear Agreement
A specific guarantee is easy to create and understand because it deals with a single obligation. It is commonly used in simple business transactions.
Example of Specific Guarantee
A common example is a loan guarantee. Suppose a person takes a loan from a bank and another person guarantees repayment of that loan. Once the loan is fully repaid, the guarantee ends.
Another example can be a guarantee for payment of goods purchased in a single transaction. After the payment is made, the surety’s responsibility is over.
Importance of Specific Guarantee
A specific guarantee is important in situations where only one transaction needs security. It is useful for short-term or one-time dealings.
It provides:
- Security to the creditor
- Limited liability to the surety
- Clarity in agreement
- Easy completion of transactions
This type of guarantee is widely used in banking and business for individual deals.
Conclusion
A specific guarantee is a guarantee given for a single transaction or obligation. It ends once the transaction is completed. It is simple, limited, and provides clear responsibility to the surety. This type of guarantee is very useful for one-time business transactions and helps in reducing risk.