Define a Contract of Guarantee under the Indian Contract Act, 1872. Also explain the essential features of a valid contract of guarantee.
CA Foundation · Business Laws · MTP · September 2025
Define a Contract of Guarantee under the Indian Contract Act, 1872. Also explain the essential features of a valid contract of guarantee.
Suggested Answer and Working Notes:
“Contract of guarantee” [Section 126 of the Indian Contract Act, 1872] Contract of guarantee: A contract of guarantee is a contract to perform the promise made or discharge the liability, of a third person in case of his default. Three parties are involved in a contract of guarantee (i) Surety- person who gives the guarantee (ii) Principal debtor - person in respect of whose default the guarantee is given (iii) Creditor - person to whom the guarantee is given ESSENTIAL FEATURES OF A GUARANTEE The following are the requisites of a valid guarantee:
Topics: The Indian Contract Act, 1872
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