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Scope of the guarantee
28/09/2004 The Star Articles of Law with Bhag Singh
The word guarantee
is so widely used that almost everyone has heard of it. Apart from its very
wide usage it is a word which will bring a degree of satisfaction to a
person.
The Little Oxford
English Dictionary says guarantee is a promise that certain things will be
done or that a product will remain in working order for a particular length
of time or something that makes a particular outcome certain or an
undertaking to pay or do something on behalf of someone if they fail to do
it.
In general
conversation the word is used very casually. A shop assistant is likely to
use the word freely about products he sells and those involved in marketing
services of various types will freely talk of guaranteed satisfaction and
enjoyment.
However the word
guarantee is also used in more specific ways in laws and provisions. It is
in such circumstances that the word is clearly defined and its implications
clearly stated.
Arising out of
such a definition it is possible to determine the extent and scope of the
guarantee that is involved and to which parties have subjected themselves.
Where a guarantee
exists in such circumstances the effect of the guarantee would have to be
considered in the context of the related clauses as well as preconditions
and qualifications that are set out.
The use of the
word guarantee may be divided into three categories. One is where the word
is used as defined in the Contracts Act 1950. The second would be where it
is used in the sense of a product warranty. The third is where the word is
used casually without intending to be serious about the representation or
even being bound.
The concept of a
guarantee in the Contracts Act 1950 involves three parties. This is because
two parties actually enter into an arrangement or transaction and the third
party undertakes to assure the fulfilment of the obligation by a party to
the basic arrangement in the event of default.
This emerges
clearly from the description of a guarantee under the Contracts Act
1950 where the word is defined in Section 79 in the course of which the
elements and parties who are involved and their relationship are set out:
"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 is respect of which default the guarantee
is given is called the principal debtor, and person to whom the guarantee is
given is called the creditor. A guarantee may be either oral or written."
A person who gives
such a guarantee and is usually referred to as a guarantee is usually
referred to as a guarantor in the language of the Contracts Act 1950 is also
referred to as a surety. In this connection it is relevant to note that
according to section 81 of the Contracts Act, the liability of the surety is
coextensive with that of the principal debtor, unless it is otherwise
provided by the contract.
In this sense
therefore there cannot be a guarantee unless three parties are involved.
This contrasts with a guarantee which is given by a trader or manufacturer
to a buyer of the product.
Even though it is
the trader who assures the buyer that the product is guaranteed the actual
assurance is likely to be issued by the manufacturer and therefore the right
of the buyer would be against the manufacturer.
Since the warranty
is in writing, the buyer would be able to assert his rights against the
party who has clearly given the guarantee or warranty.
On the other hand
with respect to oral utterances made involving sale of items or property or
services the sale person may make statements that there is a guarantee of a
panoramic views, satisfaction on using the product or happiness on using the
service.
Such statements if
they are relied upon are of little value though in the course of the
conversation the word "guarantee" may be used very generously and have
considerable impact on the consumer.
There are several
reasons that the use of the such words in conversation may be of very little
value.
This would be
because in some cases there may be written document drawn up before the
actual transaction is formalised which contains the terms and conditions.
Many statements made earlier would not even be in the agreement.
An example would
be purchase of landed property. The brochure, the scale models and claims by
a sales person may give the feeling that all that is said is part of the
deal.
However much of
this may not be reflected in the Sale and Purchase Agreement which will
become the binding contract and evidence of statement made earlier on would
be inadmissible under rules of evidence.
Another aspect is
that guarantees of satisfaction, happiness or panoramic view would be
incapable of precise definition and therefore under principles of contract
would be vague and of little or no legal effect on account of uncertainty. |
