Guarantee Agreement Template and How to Draft One (2026)

What a guarantee agreement is A guarantee agreement, or contract of guarantee, is a promise by one person (the surety or guarantor) to answer for the debt or default of another person (the principal debtor) made to a third person (the creditor). In India this is governed by Sections 126 to 147 of the Indian Contract Act, 1872. A contract of guarantee can be oral or written, but in practice it is always written, and often executed as a deed of guarantee on stamp paper. A guarantee is different from an indemnity. In a guarantee there are three parties and the guarantor's liability is secondary: it is triggered only when the principal debtor defaults. In an indemnity there are two parties and the liability is primary. Knowing which one you are signing matters, because the guarantor's defences differ. ## Guarantee agreement template (copy and adapt) ```

DEED OF GUARANTEE This Deed of Guarantee ("Guarantee") is made on [Date] BY [Guarantor name], [son/daughter of / entity details], residing at / registered at [address] (the "Guarantor"); IN FAVOUR OF [Creditor name], [entity details], at [address] (the "Creditor"); IN RESPECT OF the obligations of [Principal Debtor name], [details] (the "Principal Debtor"). RECITALS A. The Creditor has agreed to [grant a loan of / supply goods on credit to / provide facilities to] the Principal Debtor under [the Facility/Agreement dated ____] (the "Underlying Obligation"). B. As a condition, the Creditor requires this Guarantee. NOW THIS DEED WITNESSES: 1. GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Creditor the due and punctual payment and performance by the Principal Debtor of all sums and obligations under the Underlying Obligation (the "Guaranteed Obligations"). 2. NATURE OF LIABILITY The Guarantor's liability is [joint and several / limited to Rs. ____] and is that of a primary obligor to the extent stated, but arises on the Principal Debtor's default. 3. LIMIT AND DURATION The maximum liability of the Guarantor is capped at Rs. [amount] plus interest and costs. This Guarantee remains in force until [the Guaranteed Obligations are fully discharged / date]. 4. CONTINUING GUARANTEE This is a continuing guarantee under Section 129 of the Indian Contract Act, 1872, covering a series of transactions, and is not discharged by intermediate settlement. 5. DEMAND AND PAYMENT On written demand by the Creditor stating the Principal Debtor's default, the Guarantor shall pay within [] days without requiring the Creditor to first proceed against the Principal Debtor or any security. 6. CONTINUATION ON INDULGENCE The Guarantee is not discharged by time, indulgence, variation, compromise or release granted to the Principal Debtor, except to the extent the law makes such discharge mandatory. [See notes.] 7. REVOCATION As to future transactions, the Guarantor may revoke this continuing guarantee by [__] days' written notice (Section 130). Liability already incurred is not affected. 8. GUARANTOR'S RIGHTS On payment, the Guarantor is subrogated to the Creditor's rights against the Principal Debtor (Section 140) and may recover from the Principal Debtor (Section 145). 9. REPRESENTATIONS The Guarantor confirms it has capacity and authority, has received no misrepresentation or concealment by the Creditor, and enters this Guarantee of its own free will. 10. SECURITY This Guarantee is [unsecured / secured by ______] and is in addition to, not in substitution for, any other security. 11. NOTICES, GOVERNING LAW, DISPUTES Notices in writing to the addresses above. Governed by the laws of [India]. Disputes subject to [arbitration at ____ / courts at ____]. IN WITNESS WHEREOF the Guarantor has executed this Deed on the date first written above. ______________________ Witness 1: __________________ Guarantor Witness 2: __________________ Name / Designation