Guarantee [Sections 126 — 147]

Your cousin wants a two-wheeler loan, but the finance company says it will lend only if an adult with a steady income stands behind him. Your uncle signs. Two years later your cousin stops paying the instalments. Can the company go straight to your uncle? What if the company quietly gives your cousin extra time without telling your uncle? Sections 126 to 147 of the Indian Contract Act are the rulebook for that uncle, who is called the surety.

In two minutes

A contract of guarantee is a promise to perform the promise or discharge the liability of a third person if he defaults (s.126), and the surety's liability is co-extensive with the debtor's (s.128) unless the contract says otherwise, but it is lost or reduced by the events listed in ss.133 to 141.

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