Section 126 of ICA : Section 126: "Contract Of Guarantee", "Surety", "Principal Debtor" And "Creditor"

ICA

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Explanation using Example

Imagine Rahul wants to take a loan from a bank, but the bank is concerned about his credit history. The bank requires a guarantee that the loan will be repaid. Rahul's friend, Anita, agrees to be a surety. This means if Rahul fails to repay the loan, Anita promises to pay it on his behalf. Here, Rahul is the principal debtor, Anita is the surety, and the bank is the creditor. This arrangement forms a contract of guarantee as per Section 126 of The Indian Contract Act, 1872.

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