By SUBAS RANJAN BARIK

INDEMNITY
y A contract by which one party promise to save the

other from loss caused to him by the conduct of the promisor or any other person is called a contract of indemnity.
y The promisor is called indemnifier. y The promisee is called indemnified. y It is of two types:y (a) expressed y (b) implied

Essentials of indemnity
y It should satisfy Essentials of a valid contract y There must be a promise to save other party

from some loss

y The loss may be due to any person y It may be expressed / implied

Rights of indemnity holder against indemnifier

y He can recover all the damages y He can recover cost of suits y He can also recover the amount which given for

any compromise with indemnifier s permission

Rights of indemnifier against indemnity holder There is no provision under contract act.

GUARANTEE
y A contract of guarantee is a contract to perform the

promise/discharge the liability of a third person in case of his default.

y The promisor is called surety. y The promisee is called principal debtor. y The third party is called as creditor. y It is of two types:y (a) expressed y (b) implied

Essentials of GUARANTEE
y It should satisfy Essentials of a valid contract
y It must be supported by consideration y Some must be liable primarily y The promise to pay must be conditional y There should not be any concealment of facts y There should not be any misrepresentation

y It may be expressed / implied

Kinds of GUARANTEE
y Specific/simple guarantee:-on a single/particular debt & y y y y y

come to an end with due performance. Retrospective guarantee:-for an existing debt Prospective guarantee:-for a future debt Fidelity guarantee:- for good conduct/honesty Absolute guarantee:-without condition conditional guarantee:- with condition

y Continuing guarantee:-which is for a series of transactions

of continuing nature Revocation can be made

y By death of surety

y By notice of revocation by surety

Rights of surety
y Right against the creditor y Right to claim securities-what ever received from principal debtor y Right of setoff-reduce the debt amount after payment. y Right to share reduction y Right against the principal debtor y Right of subrogation-if on default he has paid the debt , he has every right of a creditor. Even in case of insolvency he can claim for his paid amount. y Right of indemnity- principal debtor may promise to repay (compensate) the surety amount. y Right against the co-surety y Right to contribution y Right to share benefit of security

DISCHARGE OF SURETY
y By notice. y By death. y By variation in the terms & conditions of original contract. y By discharge of principal debtors. y By compounding by creditor with the principal debtors. y By loosing the security-discharge up to value of security. y By creditors act / omission of any duty towards surety. y By invalidation of the contract.

Indemnity

v/s Guarantee
1.Number of parties 3 2.Objective is for security of a debt/conduct. 3.Number of contracts 3 4. Liability is not primary in nature. 5. Request by the debtor is must. 6. There is existing debt / duty 7. The surety can sue against creditor

1.Number of parties 2 2.Objective is to reimburse the loss. 3. Number of contracts 1 4. Liability is primary in nature. 5. Request by the debtor is not required. 6. No existing debt / duty 7. No rights to sue third party.

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