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A Letter of Comfort [LoC] is a financial instrument that is usually given by the parent company or the promoter, attesting to the financial soundness and solvency of the obligor (the company receiving the credit from the lenders). A lot of debate has already taken place with regard to the enforceability of such an instrument that could not be put under the strict definition of a guarantee.
But the similarities between the two instruments cannot be ignored. A typical contract of guarantee also has three parties where a third person (the parent company or the promoter, in this case) acts as a surety for the principal debtor (obligor or the company taking the loan) to the lender. A contract of guarantee has its own rules of enforcement given under the Indian Contract Act, 1872. However, the position of LoC as being covered under the Act has been a contentious issue.