Section 126 of Indian Contract Act, 1872
Section 126 of Indian Contract Act, 1872 defines various terms: 'Contract of Guarantee', 'Surety', 'Principal Debtor' and 'Creditor'.
From the Act
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 in respect of whose default the guarantee is given is called the " principal debtor ", and the person to whom the guarantee is given is called the " creditor ". A guarantee may be either oral or written.
Recent / Related Cases
- A Contract of Guarantee is a tripartite agreement involving three parties.
- The guarantor is totally unconnected with the contract guaranteed, except through the medium of guarantee.
- A Contract of Guarantee can be in written or oral form but in banking practice, it is always written.
Related sections from the Act
- Section 127: Consideration for guarantee
- Section 128: Surety's liability
- Section 129: "Continuing guarantee"
- Section 130: Revocation of continuing guarantee
- Section 131: Revocation of continuing guarantee by surety's death
- Section 141: Right to securities
- Section 42: Devolution of joint liabilities