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Contract of Indemnity and Guarantee

This document discusses contracts of indemnity and guarantee. A contract of indemnity involves one party promising to save another from loss caused by the promisor or a third party. A contract of guarantee involves a surety promising to perform or discharge the liability of a principal debtor in case of default. Both require consideration, two or more parties, and consent to be valid contracts. The promisor/surety indemnifies or guarantees the promisee/creditor for losses related to the principal debtor or promisor's own actions.

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Sudipta Bhuyan
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351 views13 pages

Contract of Indemnity and Guarantee

This document discusses contracts of indemnity and guarantee. A contract of indemnity involves one party promising to save another from loss caused by the promisor or a third party. A contract of guarantee involves a surety promising to perform or discharge the liability of a principal debtor in case of default. Both require consideration, two or more parties, and consent to be valid contracts. The promisor/surety indemnifies or guarantees the promisee/creditor for losses related to the principal debtor or promisor's own actions.

Uploaded by

Sudipta Bhuyan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Contract Of Indemnity And Guarantee

Contract of indemnity

According to Sec. 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"


e.g.: A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees

Contract of indemnity

According to English Law, a contract of indemnity means a promise to save another harmless from loss caused as a result of a transaction entered into at the

instance of the promisor

It includes promises to save another from loss caused by

events or accidents like death, disability, destruction by


fire, cyclone, etc.

Contract of indemnity

The promisor in the contract of Indeminty


is called Indemnifier

The promisee who is to be protected is


called Indemnity holder or Indemnified

Essentials of Contract of Idemnity

There must be two parties in a contract of


Indemnity

A contract of indemnity may be express or


implied

Essentials of Contract of Idemnity

Since this is a species of contract, it is subject to all the rules


of contract

A contract of indemnity is enforceable only when the promisee suffers a loss the happening of which is unknown

Consideration in this contract is essential to enable the indemnity holder to make claim to be compensated

Rights of indemnity holder

The promisee in a contract of indemnity, is entitled to recover from the promisor

all damages which he may be compelled to pay in any suit in

respect of any matter


all costs which he may be compelled to pay in any such suit all sums which he may have paid under the terms of any compromise of any such suit

Contract of Guarantee

According to sec. 126, a contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default.

Contract of Guarantee

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

The person to whom the guarantee is given is called

the creditor

Contract of Guarantee

Consideration for guarantee

Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to

the surety for giving the guarantee


e.g.: B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of As promise to deliver the goods.

Essentials of Contract of Guarantee

Form a contract of guarantee is just like any other contract which may be either oral or writing

Tripartite agreement every contract of guarantee

involves three agreements between


The creditor and principal debtor

Surety and the creditor


The surety and the principal debtor

Essentials of Contract of Guarantee

The promise to pay must be conditional the liability of the surety should arise only when the principal debtor makes a default

Consideration something done for the benefit of


the principal debtor is considered as consideration

for the guarantee to make the contract valid

Essentials of Contract of Guarantee

Competency the principal debtor, surety and creditor must be a person competent to contract

Consent there must be free consent, otherwise the

contract of guarantee may become void or voidable

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