Guarantee:- section 126 of Indian Contract Act ,1872 defines, Contract of guarantee as
"A contract to perform the promise, or discharge the liability of a third person in case of his default.
Example- 'A' advances a loan of $1000 to 'B' and C promises A that if B does not repay the loan, I will repay it. This is a contract of guarantee. It involves 3 parties
1. Surety- Who gives the guarantee.
2. Principal Debtor- In respect of whose default the guarantee is given.
3. Creditor- Whom the guarantee is given.
Types of guarantee( On the basis of transactions)
1. Specific Guarantee- Guarantees which are only for the specific transactions.
Example:- A,B,C, three parties. A said to B that my friend C will come to your shop to buy some goods on credit, give him the goods for this time and also gave the surety of payment.
2.Continuing guarantee- Guarantee which keeps on going known as continuing guarantee, in other words series of transactions.
