Guarantee
Definition
A contract to perform the promise, or discharge the liability, of a third person in case of his default (Section 126, ICA 1872). It involves three parties: Principal Debtor, Creditor, and Surety. A guarantee is secondary liability.
Example
"A (Surety) tells B (Bank/Creditor) that if C (Principal Debtor) fails to repay his loan, A will pay. If C defaults, B can recover from A."