Indemnity and Guarantee – Multiple Choice Questions
1. The person in respect of whose default, the guarantee is given is called ………..
(a) principal debtor
(b) principal creditor
(c) principal surety
(d) principal bailee
Ans. (a)
2. In contract of indemnity how many parties are required ?
(a) 4
(b) 6
(c) 7
(d) 2
Ans. (d)
3. The guarantee of single transaction is ………..
(a) general guarantee
(b) continuous guarantee
(c) implied guarantee
(d) none of these
4. Which type of guarantee is given for series of transaction ?
(a) general guarantee
(b) implied guarantee
(c) continuous guarantee
(d) general and continuous guarantee
Ans. (c)
5. The person to whom the guarantee is given is called ………..
(a) creditor
(b) debtor
(c) surety
(d) third party
Ans. (a)
6. The contract of Guarantee should be ………..
(a) Implied
(b) only written
(c) only oral
(d) written or oral
Ans. (d)
7. Liability of surety is ………..
(a) secondary liability
(b) preliminary liability
(c) subsidiary liability
(d) co-related liability
Ans. (a)
8. In contract of indemnity must be for ………..
(a) five parties
(b) agreement without consideration
(c) implied consideration
(d) lawful consideration and object
Ans. (d)
9. Who is protected under the contract of guarantee ?
(a) guarantor
(b) creditor
(c) third person
(d) debtor
Ans. (b)
10. Whose consent is necessary in the contract of guarantee ?
(a) Surety
(b) Creditor
(c) Debtor
(d) All the above
Ans. (d)
11. On whose default, the promise of discharge of liability is given in contract of guarantee ?
(a) Principal debtor
(b) Subsidiary debtor
(c) Principal guarantor
(d) All above
Ans. (a)
12. How many parties are there in contract of guarantee ?
(a) One
(b) At will
(c) Three
(d) Two
Ans. (c)
13. The contract of guarantee is for protection of ………..
(a) creditor
(b) debtor
(c) guarantor
(d) none of these
Ans. (a)
14. A continuing guarantee applies to:
(a) a specific transaction
(b) a specific number of transactions
(c) all transactions of specific transaction series
(d) reasonable number of transactions.
Ans. (c)
15. The surety stands discharged:
(a) by revocation
(b) by death
(c) by variance in terms of the contract without his consent
(d) in (a), (b) & (c) above.
Ans. (c)
16. Under the contract of guarantee, a creditor:
(a) has to avail his remedies first against the principal debtor
(b) can avail his remedies against the principal debtor as well as the surety
(c) can avail his remedy against the surety alone
(d) both (b) & (c).
Ans. (a)
17. Surety stands discharged:
(a) by an agreement between the creditor and the principal debtor
(b) by an agreement between the creditor & a third party for not to sue the principal debtor
(c) both (a) & (b) above
(d) neither (a) nor (b).
Ans. (a)
18. Under a contract of guarantee:
(a) if principal debtor is not liable, guarantor is not liable
(b) if principal debtor is not liable, guarantor is liable
(c) if principal debtor is liable, guarantor is liable
(d) all the above.
Ans. (c)
19. In a contract of guarantee:
(a) there are two parties and one contract
(b) there are two parties and two contracts
(c) there are three parties & three contracts
(d) there are three parties & one contract.
Ans. (d)
20. In case of co-sureties, release of one surety by the creditor:
(a) amounts to discharge of other sureties
(b) does not amount to discharge of other sureties
(c) amounts to discharge of the surety so released vis-a-vis co-sureties as well
(d) none of the above.
Ans. (b)
21. On payment or performance of the liability, the surety:
(a) is invested with all the rights the creditor had against the principal debtor
(b) is entitled to every security which the creditor has against the principal debtor
(c) is entitled to be indemnified by the principal debtor
(d) all the above.
Ans. (a)
