Under The Indian Contract Act, 1872, a Contract to perform the promise or discharge the liability of a third person in case of his default,:-

Section 126 defines Contract of Guarantee “Contract of guarantee”, “surety”, “principal debtor” and “creditor”—A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written Contract of Indemnity is defined under Section 124 a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”