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Section 127, Contract Act 1872: Consideration For Guarantee

Section 127 under the Chapter VIII (Of indemnity and guarantee) of the Contract Act, 1872 of India - 'Consideration for guarantee', is reproduced hereunder:—

“Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.

Illustrations

(a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A's promise to deliver the goods. This is a sufficient consideration for C's promise.

(b) A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C's promise.

(c) A sells and delivers goods to B. A afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.”

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