The term “guarantee” is defined by the Black Laws Dictionary as “the certainty that a legal contract will be duly enforced.”A guarantee contract is regulated by the Indian Contract Act, 1872, and comprises 3 parties, including one who serves as the guarantor if the defendant fails to meet his obligations. Whenever a party seeks a loan, products, or employment, a guaranteed contract is usually required. In such arrangements, the guarantor promises the creditor that the person in need can be trusted and that in the event of a default, he will accept responsibility for payment.

According to sec 126, “A contract of guarantee is a contract to perform the promise or discharge
the liability of the third person in case of his default”. A guarantee may be either oral or written.

Surety: A surety could be a person giving a guarantee during a contract of guarantee. Someone who takes responsibility to pay cash performs any duty for one more person just in case that person fails to perform such work.

 Principal Debtor: A principal mortal could be a person for whom the guarantee is given during a contract of guarantee.

Creditor: The person to whom the guarantee is given is referred to as a creditor. 

ESSENTIALS OF A CONTRACT OF GUARANTEE
following are the essential features of a valid contract of guarantee.

1. Tripartite agreement:
   contract of guarantee is a tripartite agreement between the principal debtor, creditor and
   surety
2. Consent of three parties:
   There must be a consent of all three parties
3. It may be oral or in writing:
   A contract of guarantee may be either oral or in writing. Whereas, as per English law, the
   guarantee must be in writing and signed by the party who offers the guarantee.
4. Existence of Liability:
   There must be an existing liability or a promise whose performance is guaranteed and such
   liability must be enforceable by law. The exception to this rule is a guarantee given for a minor’s
   debt. Though the minor’s debt is not enforceable by law, the guarantee given for the minor’s debt is
   valid.
5. Essentials of a valid contract:
   All the essentials of a valid contract must be present in a contract of guarantee. However, the
   following points are worth noting in this regard.
   A) The principal debtor need not be competent to contract and the surety would regard as
   the principal debtor and would be personally liable to pay.
   B) Surety need not be benefited. Anything done or any promise made, for the benefit of the
   principal debtor, may be a sufficient consideration to the surety for giving the guarantee.
6. Guarantee not to be obtained by misrepresentation:
   Any guarantee which has been obtained by means of misrepresentation made by or with
   his knowledge and assent, concerning a material part of the transaction is invalid.
7. The contract of guarantee must be supported by consideration
   We have discussed above that n contract of guarantee must have all the essential, valid
   contract. It will be interesting to know that it is not necessary that there be direct consideration
   between the surety and creditor. The law presumes that consideration received by the principal
   debtor is sufficient consideration for the surety.
8. The promise to pay must be conditional
   It is another important essential element of a contract of guarantee. There must be a
   conditional promise to be liable for the default of the principal debtor.
9. There should be no concealment of fact
   The creditor should disclose to the surety the facts which are likely to affect the surety’s
   liability. The guarantee obtained by the concealment of such facts is invalid.