Indian Contract Act Section 126 — “Contract of guarantee”, “surety”, “principal debtor” and “creditor”

Summary

A contract of guarantee is an agreement where one person promises to perform a duty or pay a debt that belongs to someone else, but only if that other person fails to do it themselves. The person making this promise is called the surety. The person whose failure triggers the promise is called the principal debtor. The person who receives the benefit of the promise is called the creditor.

A guarantee can be made either by spoken words or in writing.

Official Text

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.

Related Judgments

• BRS VENTURES INVESTMENTS LTD. vs SREI INFRASTRUCTURE FINANCE LTD. & ANR — Supreme Court of India (2024)
• PHOENIX ARC PVT. LTD. vs KETULBHAI RAMUBHAI PATEL — Supreme Court of India (2021)
• CANARA BANK OVERSEAS BRANCH REP. BY SENIOR MANAGER vs ARCHEAN INDUSTRIES PRIVATE LIMITED AND ANOTHER — Supreme Court of India (2026)
• CHINA DEVELOPMENT BANK vs DOHA BANK Q.P.S.C. & ORS — Supreme Court of India (2024)
• PUN.JAB NATIONAL BANK LIMITED vs BIKRAM COTTON MILLS & ANR — Supreme Court of India (1969)
• being a Cooperative Society registered ]; under the Maharashtra Cooper vs 1. State Bank of India (Dombivli, ], Industrial Estate Branch), at and — Bombay High Court (Mumbai Principal Seat) (2005)