Essential ingredients of a contract of guarantee under Section 126

Under Section 126 of the Indian Contract Act, 1872, a contract of guarantee is defined as a contract to perform the promise or discharge the liability of a third person in case of their default. For an instrument or obligation to legally constitute a valid guarantee, three core ingredients must concur: the existence of a principal debt, a subsequent default committed by the principal debtor, and an explicit, unequivocal promise made by the surety to answer for and discharge the debt or obligation of the principal debtor upon such default. A guarantee functions as a security mechanism providing the creditor with a substantive right of action directly against a third party. Therefore, in order to establish a contract of guarantee, there must be a specific, direct undertaking or unambiguous affirmation binding the promisor to discharge the debtor's liability to the creditor, without which no relationship of suretyship can be inferred or enforced. (UV Asset Reconstruction Company Limited Vs Electrosteel Castings Limited | 2026 INSC 14)