INTRODUCTION & DEFINITION
The Indian Contract Act of 1872, a component of mercantile laws, was enforced on September 1,1872. Functioning as private law, it draws inspiration from English common law but was enacted by the Indian Parliament, specifically the Calcutta Parliament.Comprising XI chapters, it underwent changes,with Chapter VII on the Sale of Goods and Chapter XI on Partnership being repealed in 1930and 1932, respectively. Following these repeals, it emerged as an independent act divorced from its parent legislation, the Indian Contract Act 1872. Inthe contemporary market sector, where contractual dealings prevail, a thorough understanding of this act is essential. Encompassing a wide array of topics, it delineates concepts such as offer, acceptance, essentials of a contract, valid consideration, voidable agreements,quasi-contracts, and damages under the Indian Contract Act of 1872. Additionally, it delves into specific types of contracts, including those related to indemnity, guarantee, bailment, pledge, andagency.Section 127- “A contract of guarantee is a contract to perform the promise, or discharge the liability, of third person in case of his default”. Surety is the person who gives the guarantee; principal debtor is the person in respect of whose default the guarantee is given is, and Creditor is the person to whom the guarantee is given. A guarantee can be both either in oral or inthe format of written document.According to the black law dictionary the term guarantee is the assurance that a legal contract will be duly enforce. A contract of Guarantee is governed by Indian Contract Act, 1872. It includes the parties Principal Debtor, Creditor, and Surety/Guarantee. Guarantee contracts are typically necessary when a party seeks a loan,goods, or employment. In such agreements, the guarantor provides assurance to the creditor regarding the trustworthiness of the individual seeking assistance. In the event of any failure to fulfill obligations, the guarantor assumes responsibility for repayment.
