Ive got a 96 xj that leaked badly at the rear drive shaft seal. i found the right seal and changed it and it did not stop leaking. i just took the drive shaft off and got the dust cover off and noticed that apparently i missed putting a C-clip back on that goes next to the seal. what does this c-clip do? does it go inside or outside the seal? if this has nothing to do with anything? than why would the new seal leak?

 

Whats a driveshaft seal?? Rear shaft don't have seals.
If you left a c-clip off one of you axels, then there is NOTHING holding that axel into the housing. You will have a 3 wheeler soon.

 

The seal on the end of the transfercase I believe

 

yeah. this c-clip does not have any apparent function. it is under the dust cover that goes over the seal at the back of the T-case. it is a later cherokee with an external slip yoke.