The consideration may benefit the surety but it is not necessary that surety should receive any benefit from the consideration in contract of guarantee. The consideration for the suretyвЂ™s promise may move from either the creditor or the Principal Debtor. This section basically talks about the consideration in a contract of guarantee. Whereas, the primary liability in a contract of guarantee is of the principal debtor and secondary liability is of surety. The nature of liability in the contract of indemnity is of the indemnifier i.e. A single agreement can also make them parties to a contract of guarantee. However, there is no need to have three separate agreements between 3 parties. In contract of guarantee there are 3 contracts, first is between principal debtor and creditor, second is between creditor and surety and third one is between surety and principal debtor. indemnifier and indemnity holder whereas in contract of guarantee there are 3 parties involved i.e. In contract of indemnity parties involved are 2 i.e. In this indemnify is not equal to the contract of indemnify in Section 124 of ICA.Дifference between contract of guarantee and contract of indemnity Therefore, the contract of guarantee is to indemnify if principal debtor fails to fulfill his promise. when the principal debtor fails to pay, the surety comes into role.

Whereas, the secondary liability is of the Surety i.e. Therefore, the primary liability to pay is of the principal debtor. IN case the principal debtor fails who is in the first instance liable to pay or perform. Contract of guarantee is a promise to answer for the payment of the debt that the principal debtor takes from the creditor or the performance of some duty. However, for a contract to form in between the parties there should be meeting of minds that means all three parties should be privy to the contract. The person to whom the guarantee is given is called the creditor.Д¬ontract of guarantee can be of two types. The person of whose default the guarantee is given is called the вЂњPrincipal debtorвЂќ.

The person who gives the guarantee is called вЂњsuretyвЂќ. It defines a contract of guarantees a contract to perform the promise or discharge the liability of a third person in case of his default. Section 126 of Indian Contract Act defines Contract of guarantee.

Principal definition banking