Sorry if this has been covered already, couldn't find a direct answer.
Situation arose in a battle last night:
My Flesh Hounds of Khorne, with Karanak, and my Daemon Prince assaulted into a unit of Deathwing Terminators, with a Sergeant, and accompanied by a Terminator Librarian. How does the challenge work?
a) Is one challenge issued by the Daemons (both squads) then accepted by the
DA, leaving everyone else sitting on the sidelines?
b) Challenge is issued by the Daemons (both squads) - if accepted and involving my
DP, the FH still get to attack (and the
DA in response)?
c) Technically the
DP could be in a challenge with the Librarian; Karanak in a challenge with the Sergeant; and the rest of the FH and
DA stand around cheering (as there is more than one unit involved)?
We went with c as it was more fun, but I was left quite confused!
(For completeness sake, Karanak and the Sergeant killed each other; and the
DP killed the Libby!

) .