Section 142: Guarantee obtained by misrepresentation

Rule and business relevance

Focus on how the guarantee was obtained, what was misrepresented and its material connection to the transaction. The creditor involvement described by the statute must be established.

Limits and related provisions

Not every inaccurate statement by any person automatically meets this section. Separate misrepresentation under this provision from concealment under section 143 and other applicable grounds.

Hypothetical business example

Hypothetical example: A creditor knowingly endorses an inaccurate material description of the debt to obtain a guarantee. The surety should preserve the representation and evidence of the creditor’s involvement.

Practical decision flow

Identify the exact representation used to procure the guarantee.

Explain why it concerned a material part of the transaction.

Document the creditor’s statement or knowledge and assent.

• India Code: Contract Act, section 142

Check the applicable legal framework

This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.

Practical checklist

Glossary

Material representation

A representation concerning a significant part of the transaction.

Procurement

The process by which the guarantee was obtained.

Frequently asked questions