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 Contract of Indemnity
 A contract in which one party promises to save the other from loss.
 Caused to him by the conduct of promisor himself, or by the conduct of any other person.
 Contingent contract – future contract.
 Deals with loss caused by the conduct of a person.
 Loss not caused by events or accidents.
 Parties in Contract of Indemnity
There are two parties in contract of Indemnity.
1) Indemnifier or promisor
The person who will save the loss of another by his conduct
2) Indemnity holder or promisee
The person be saved from loss by conduct of indemnifier

 Example:

“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. This is a contract of
indemnity

 Contract of Guarantee
 A contract of guarantee is a contract to perform the promise, or discharge the liability of a
third person.
 Parties in Contract of Guarantee
There are three parties in contract of guarantee.
1) Creditor
The person to whom guarantee is given
2) Principal debtor
The person in respect of whose default the guarantee is given.
3) Surety
The person who gives guarantee is called surety.

 A guarantee may be either oral or written.

What is difference between Contract of indemnity and surety?

 In both contracts loss is saved.
 There are two parties in contract of indemnity and three in contract of Guarantee.
 In contract of Indemnity person is not specified, who will save the loss meanwhile in
contract of Guarantee the person is specified, who will save the loss that is surety.

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 Consideration of Guarantee
 Anything done or any promise made for the benefit of creditor or principal debtor.
 Consideration of surety.
 Example
“A” requests B”” 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 A’s promise to deliver the goods.

 Surety’s Liability
 The liability of surety is co-extensive with that of principal debtor.
 Example: -
“A” guarantees to “B” the payment of a bill of exchange by “C”, the acceptor. The bill is
dishonored by “C”; “A” is liable not only for the amount of the bill but also for any
interest and charges which may have become due on it.

 Continuing guarantee
 A guarantee which extends to a series of transactions is called continuing guarantee.
 Example
A” in consideration that “B” will employ “C” in collecting the rent of B’s Zamindari,
promises “B” to be responsible, to the amount of 5000 rupees for the due collection and
payment by “C” of those rents. This is a continuing guarantee.

 Revocation of continuing guarantee

 A continuing guarantee may, at any time be revoked by surety,
 As to future transactions,
 By notice to the creditor.

Revocation of continuing guarantee by surety’s death

 Death of surety revokes guarantee.

 Liability of two persons as co-surety’s

 Two are more than two sureties and make arrangement between them.
 Or second contract made between two surety’s so cannot affect first contract.

 Discharge of surety by variance in terms of contract

 Any variance (change), made without the surety’s consent in terms of the contract
between principal debtor and the creditor, discharges the surety as to transactions.
 Example
“C” agrees to appoint “B” as his clerk to sell goods at a yearly salary, upon A’s becoming
surety to “C” for B’s duly accounting for moneys received by him as such clerk.
Afterwards without A.s consent, “C” and “B” agree that “B” should be paid by a
commission on the goods sold by him and not by a fixed salary. “A” is not liable for
subsequent misconduct of “B”.

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 Discharge of surety by release or discharge of principal debtor
 The surety is discharged by any contract between the creditor and principal debtor by
which the principal debtor is released or by an act or omission of creditor.
 Principal debtor is discharged by the non performance of creditor so surety is also
discharged.
 Principal debtor released after payment of amount so surety discharged.
 Example
“A” gives a guarantee to “C” for goods to be supplied by “C” to “B”. “C” supplies goods
to “B”, and afterwards “B” becomes embarrassed and contracts with his creditors
(including C) to assign to them his property in consideration of their releasing him from
their demands. Here “B” is released from his debt by the contract with “C”, and “A” is
discharged from his surety ship.

 Discharge of Surety when creditor compound with principal debtor

 Creditor compounds in which creditor makes a composition with, or promises to give
time.
 Or agrees not to sue principal debtor.
 Without the consent of surety.
 Discharges the surety.
 Surety not discharged when agreement made with third person to give time to principal
debtor
 Where a contract to give time to principal debtor is made by the creditor with a third
person, and not with principal debtor, the surety is not discharged.

 Creditor’s forbearance to sue does not discharge surety

 Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any
other remedy against him does not discharge the surety.
 Example
“B” owes to “C” a debt guaranteed by “A”. The debt becomes payable. “C” does not sue
“B” for a year after the debt has become payable. “A” is not discharged from surety ship.

 Release of one co-surety does not discharge others

 Where there are co-sureties, a release by the creditor of one of them does not discharge
the others; neither does it free the surety so released from his responsibility to other
sureties.

 Discharge of surety by creditors act or omission

 If the creditor does any act which is inconsistent with the rights of the surety, or omits to
do, any act which his duty to the surety requires him to do, and the eventual remedy of
the surety himself against the principal debtor is there by impaired the surety is
discharged.
 Example
“B” contracts to build a ship for “C” for a given sum, to be paid by installments as the
work reaches certain stages. “A” becomes surety to “C” for B, s due performance of the

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 contract. “C” without the knowledge of “A” prepays to “B” the last two installments. “A”
is discharged of prepayment.

 Rights of surety on payment or performances

 Where a guaranteed debt has been due.
 Or default of the principal debtor to perform a guaranteed duty has taken place.
 The surety is liable for performance or payment.
 All the rights invested which creditor had against principal debtor.

 Surety’s right to benefit of creditors securities

 Surety is liable for the security of creditor which has against the principal debtor at the
time of surety ship.
 Security given to creditor by principal debtor.
 Default committed by principal debtor.
 Surety liable to pay.
 Security discharge to extent of value of security.
 Example
“C”, a creditor whose advance to “B” is secured by decree, receives also a guarantee for
that advance from “A”. “C” afterwards takes B’s goods in execution under the decree,
and then, without the knowledge of “A”, withdraws the execution. “A” is discharged.

 Guarantee obtained by misrepresentation invalid

 Any guarantee which has been obtained by means of misrepresentation made by the
creditor or with his knowledge concerning a transaction is invalid.
 Guarantee obtained by concealment invalid
 Any guarantee which the creditor has obtained by means of keeping silence as to material
circumstances is invalid.

 Guarantee on contract that a creditor shall not act on it until co-surety

joins
 Where a person gives a guarantee upon a contract that the creditor shall not act upon it
until another person has joined in it as co-surety the guarantee is not valid if that other
person does not join.

 Implied promise to indemnify surety

 In every contract of guarantee there is an implied promise by the principal debtor to
indemnify the surety: and the surety is entitled to recover from the principal debtor
whatever sum he has rightfully paid under the guarantee.

 Co-sureties liable to contribute equally

 Where two or more persons are co-sureties for the same debt, either jointly or severally
and whether under the same or different contracts and whether with or without the
knowledge of each other the co-sureties in the absence of any contract to the contrary, are
liable as between themselves to pay each an equal share of the whole debt.

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 Sale and agreement to sell
 A contract of sale of goods is a contract.
 Where the seller transfers or agrees to transfer the property to the buyer for price.
 A contract of sale may be absolute or conditional.
 Where under a contract of sale property transferred from the seller to buyer the contract is
called sale.
 But where property to be transferred in future then it is agreement to sale.

 Contract of sale
 When a property delivered or condition fulfilled it is sale.
 Agreement to sell when property or goods ready to be delivered then it becomes contract
of sale and if Goods delivered then it is sale.

 Sale of goods
 Contract of sale
 Absolute
 Goods delivered
 Sale.
 Agreement to Sale
 Conditional
 Goods not ready deliver in future
 In future Goods ready or condition fulfilled
 Contract of sale
 Goods delivered
 Sale

 Ingredients of contract of sale

 The possession must be transferred.
 Seller and buyer should be different persons.
 Goods in exchange of money are sale.
 Goods in exchange of Goods are not sale.
 Money in exchange of money is not sale.

 Definitions of the following terms

1) Buyer
Buyer means a person who buys or agrees to buy goods.
2) Delivery
Delivery means voluntary transfer of possession from one person to another.

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 3) Deliverable state
Goods are said to be in a deliverable state when they are in such state that the buyer
would under the contract be bound to delivery of them.
4) Fault
Means wrongful act or default
5) Future goods
Future goods mean goods to be manufactured or produced by the seller after making the
contract of sale.
6) Goods
Goods mean every kind of property.
7) Price
Price means the money consideration for a sale of goods.
8) Property
Property means every kind of moveable and immovable property.
9) Quality of goods
Quality of goods includes their state and conditions.
10) Seller
Seller means a person who sells or agrees to sell goods.
11) Specific goods
Means goods identified and agreed upon at the time a contract of sale is made.

 Contract of sale how made

 Contract of sale is made by an offer to buy or ,
 Offer to sell for a price.
 Then acceptance of such offer.
 The contract may provide for the immediate delivery of the goods or immediate payment
or both.
 Payment by the installments.
 Delivery or payment both in future.
 A contract of sale may be made in writing or by words of mouth.

 Existing or Future goods

 The goods in contract of sale may be either existing goods, owned or possessed by the
seller.
 Or future goods to be prepared in future.

 Goods perishing before making of contract

 Where there is a contract for sale of specific goods, the contract is void if the goods
without the knowledge of the seller have at the time when the contract was made,
perished or become so damaged.

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 Goods perishing before sale but after agreement
 Where there is an agreement to sell specific goods, and subsequently the goods without
any fault on the part of seller or buyer perish or become so damaged therefore the
agreement is void.

 Ascertainment of price
 The price in a contract may be fixed or ,
 May be left to be fixed.
 Where price is not determined reasonable price shall be paid by the buyer to the seller.

 Implied undertaking as to title

 On part of seller he has the right to sell.
 An implied warranty that the buyer shall have and enjoy quiet possession of goods.
 Goods shall be free from any charge in favor of third party.

 Sale by description
 Where there is a contract for the sale of goods by description there is an implied
condition that the goods shall correspond with the description.
 If goods not corresponds buyer may reject goods and claim damages.

 Implied condition as to quality of fitness

 Buyer expressly make known to the seller the particular purpose for which the goods are
required.
 There is an implied condition that the goods shall be reasonably fit for such purpose.
 If the particular patent or trade name given so no implied condition as to fitness.
 Seller to inform buyer of defect in goods.

 Sale by Sample
 If there is a contract of sale by sample.
 Then implied condition is that the bulk (whole stock or products) shall correspond with
the sample in quality.
 That the buyer shall have a reasonable opportunity of comparing the bulk with sample.
 That the goods shall be free from any defect.

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 Duties of Seller and Buyer
 It is the duty of Seller to deliver goods.
 And duty of Buyer to accept and pay for them.
 Payment and delivery are concurrent (parallel)
 Seller shall be ready and willing to give possession and at the same time Buyer shall be
ready and willing to pay the price in exchange of possession.

 Buyer may apply for delivery

 Seller not bound to deliver.
 Until and unless Buyer apply for delivery.

 Rule as to delivery
 Goods sold are to be delivered at a place fixed in contract.
 Or at the place goods manufactured.
 Seller may apply to appoint a place.
 Seller bound to send goods in if the time is not fixed.
 Or seller may apply for time to be fixed or he may send goods in a reasonable time.
 Expenses of putting goods in deliverable state borne by seller.

 Delivery of wrong quantity

 Where the seller delivers to the buyer a quantity of goods less then contracted buyer may
reject them.
 Or may accept the goods and pay for them at contract rate.
 Quantity of goods larger than contracted buyer may accept the quantity of goods
contracted and reject the rest extra one.
 Difficult to separate the goods he may reject or accept the whole pay on contract rate.
 The goods contracted to sell are mixed with goods of different descriptions.
 Buyer may accept the goods contracted and reject the rest or may reject the whole.

 Buyers right of examining the goods

 Not deemed to accept them unless and until he has had a reasonable opportunity of
examining goods be given.

 Buyer not bound to return rejected goods

 If goods are delivered to the buyer and he refuses to accept them.
 It is sufficient to intimates seller.
 It is not his duty to send them back.

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 Liability of buyer for neglecting or refusing delivery of goods
 When seller is ready and willing to deliver the goods.
 Requests buyer to take delivery.
 Buyer does not accept it.
 Buyer is responsible for loss.
 Reasonable charge be paid for custody.

 Suit for price

 Goods passed by buyer.
 Buyer wrongfully neglects to pay for the goods.
 Seller may sue him for the price of goods.

 Damages for non-performance

 Buyer wrongfully neglects and pay for goods.
 Seller may sue for damages for non-acceptance.

 Damages for non-delivery

 Seller wrongfully neglects to deliver goods to buyer,
 Buyer may sue seller for damages for non-delivery.

 Specific performance
 In any suit of breach specific performance of contract be demanded by plaintiff.

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