P. 1
negotiable instrument

negotiable instrument

|Views: 152|Likes:
Published by Momna Amjad

More info:

Published by: Momna Amjad on Apr 30, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less






The following are the points of distinction between the two:


Number of parties- In a contract of indemnity, there are two
parties- the creditor, the principal debtor and the surety.


Object or purpose- A contract of indemnity is for the
reimbursement of loss, whereas a contract of guarantee is for the
security of a debt or good conduct of an employee.


Number of contracts- In indemnity there is only one contract
between the indemnifier and the indemnified, while in guarantee, there
are three contracts- one between the principal debtor and the creditor,
the second between the creditor and the surety, and the third between
the surety and the principal debtor.


Nature of liability- In a contract of indemnity, the liability of
the indemnifier is primary in nature. In a contract of guarantee, the
liability of the surety is secondary, i.e., the surety is liable only on default
of the principal debtor. (If the principal debtor fulfils his obligation, the
question of surety’s liability does not arise.).


Request by the debtor- In a contract of indemnity, the
indemnifier acts independently without any request of the debtor or the
third party, whereas in a contract of guarantee it is necessary that the
surety should give the guarantee at the request of the debtor.


Existing debt or duty- In a contract of indemnity, in most
cases there is no existing debt or duty, whereas in a contract of
guarantee there is an existing debt or duty, the performance of which is
guaranteed by the surety.


Right to sue- In a contract of guarantee, the surety, after he
discharges the debt owing to the creditor, can proceed against the
principal debtor in his own right. But in the case of a contract of


indemnity, the indemnifier cannot sue the third party for loss in his own
name, because there is no privity of contract. He can do so only, if there
is as assignment in his favour, otherwise he must bring the suit (against
the third party) in the name of the indemnified.

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->