INDEMNITY ,

GAURANTEE AND
BAILMENT OF A
CONTRACT
BY - ​Ananya Singh
WHAT IS
INDEMNITY ?
To indemnify means to compensate or make good the
loss.

When promise is made to protect against the

anticipated loss, it is called Indemnity.
- Contract of indemnity depends in the happening of loss.

- Sec 124 of The Indian Contract Act defines a contract of

indemnity :-
“ A contract by which one party promise 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.”
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Therefore, in simple words, A contract of indemnity is

a contract in which one person promise to protect or
compensate the other for the loss suffered by him due
to the conduct of the promisor or any other person.
“Promisor” is “indemnifier” and “Promisee” is “indemnified”. In
other way round, “Indemnifier” is “promisor” and “Indemnified” is
“promisee”.

The object of contract of indemnity is essentially to protect the

promisee from the anticipated (future) loss.
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ESSENTIALS OF A VALID
CONTRACT OF INDEMNITY
THE CONTRACT OF
INDEMNITY MUST
IMPLIED CONTRACT OF
CONTAIN ALL THE
INDEMNITY MAY BE
ESSENTIAL OF VALID
INFERRED FROM THE
CONTRACT –
IT IS A CONTRACT CIRCUMSTANCES OF
COMPETENCY OF THE
BETWEEN TWO PARTIES. THE CASE AND ALSO
PARTIES, FREE ONE PERSON SAVE THE
THE CONTRACT OF FROM RELATIONSHIP
CONSENT, OTHER FROM ANY LOSS,
INDEMNITY MAY BE OF THE PARTIES.
CONSIDERATION, WHICH HE MAY SUFFER.
EXPRESS OR IMPLIED.
LEGALITY OF THE THE LOSS MAY BE
EXPRESS CONTRACT CAUSED BY THE
OBJECT
IS EITHER BY WORDS CONDUCT OF THE
OR WRITING. PROMISOR HIMSELF OR
ANY OTHER PERSON.
CONTRACT OF
GUARANTEE

Principal Debtor – The one who borrows or is liable to pay and on

whose default the guarantee is given.

Creditor – The party who has given something of value to borrow and
stands to receive the payment for such a thing and to whom the
guarantee is given.

Surety/Guarantor – The person who gives the guarantee to pay in

case of default of the principal debtor
 WHAT IS A CONTRACT OF 6

EXAMPLE: ‘A’ GIVES A

LOAN OF BOOK TO ‘B’
GUARANTEE
AND ‘C’ PROMISES TO ‘A’
IN CASE OF CONTRACT OF
THAT IF ‘B’ DOES NOT CONTRACT OF GUARANTEE IS A CONTRACT TO PERFORM GUARANTEE THERE ARE THREE
RETURN THE SAID BOOK, THE PROMISE OR DISCHARGE THE LIABILITY, OF A THIRD SEPARATE AGREEMENTS, NAMELY :-
HE WILL RETURN OR PAY PERSON IN CASE OF HIS DEFAULT.
FOR IT. THIS IS A
CONTRACT OF
A) BETWEEN THE
GUARANTEE.
PRINCIPAL DEBTOR
AND CREDITOR

THERE IS A CONTRACT OF
B) BETWEEN THE
GUARANTEE, WHERE A
CREDITOR AND THE
REQUESTS B TO LEND
SURETY OR SURER.
RS. 20,000 TO C AND
ASSURES THAT C WILL PAY
BACK THE SUM WITHIN
THE AGREED PERIOD. IF C C) BETWEEN THE
FAILS TO MAKE PAYMENTS, SURETY OR SURER
A WILL REPAY B AS PER AND THE PRINCIPAL
THE AGREEMENT AGREED DEBTOR.
BETWEEN THEM UNDER
THE CONTRACT OF
GUARANTEE.
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ESSENTIALS OF
A CONTRACT OF GUARANTEE

THERE MUST BE
AT LEAST THREE IT MAY BE ORAL
ALL THE PARTIES – OR WRITTEN,
ESSENTIAL
SURETY EXPRESS OR
ELEMENTS OF A IMPLIED AND IT IT IS AN
VALID CONTRACTS (GUARANTOR), THERE SHOULD SHOULD FULFILL UNDERTAKING
SUCH AS LAWFUL PRINCIPAL BE LIABILITY , ALL THE
DEBTOR AND TO PERFORM
CONSIDERATION EXISTING OR ELEMENTS OF
AND OBJECT, FREE CREDITOR AND THE PROMISE OF
FUTURE, VALID
CONSENT, ALL OF THEM OTHER ON HIS
ENFORCEABLE CONTRACT.
ELIGIBLE TO MUST JOIN THE FAILURE TO DO
AT LAW.
CONTRACT ETC CONTRACT. SO.
MUST BE
FULFILLED.
 THE DIFFERENCE …
INDEMNITY GUARANTEE
• There are two parties – indemnifier and
• There are three parties – the creditor, the
indemnified. principal debtor and the Surety.

• The liability of the indemnifier is • The liability of the principal debtor is

primary. primary. The liability of the surety is
secondary, that is, the surety is liable only if
principal debtor fails.
• There is only one contract , between
indemnifier and indemnified.
• There are three contracts – first between the
creditor and the principal debtor, second
• Indemnifier need not act on the request between the creditor and the surety and third
of the indemnified. between the surety and the principal debor.

• Surety gives guarantee on the request of the

• The liability of indemnifier arises on the principal debtor.
happening of a contingent event.
• There is an existing debt or duty, the
• It is for reimbursement of loss. performance of which is guaranteed by the
surety.
THANK YOU