1. Business Law presentation on:
INDEMNITY AND GUARANTEE

2. INDEMNITY Definition: 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”.

3. INDEMNITY Features TWO parties- Indemnity holder Indemnifier
Sec. 10- essentials should be satisfied
All insurance contracts are contracts of indemnity except life insurance.

4. Rights of Indemnity Holder:
o To claim damages
o To claim costs
o Other payments

5. GUARANTEE Definition: 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.
E.g. Guarantee for credit sales by a third person

6. GUARANTEE Parties to guarantee Surety- Who gives Guarantee
Principal Debtor- For whom guarantee is given
Creditor- To whom guarantee is given

7. Features GUARANTEE Valid Contract ( essentials of Sec-10)
Consideration for surety is loan given by creditor.
Liability arises immediately when debtor makes default.

8. GUARANTEE Implied Indemnity Right Of Subrogation Disclosure of Facts
Form- Oral or Written
Existence of Principal Debt.

9. Difference b/w Indemnity & Guarantee
Basis Indemnity
Guarantee
Meaning
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”.
A “Contract of Guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default.
Section
124
126

10. Difference b/w Indemnity & Guarantee
Basis
Indemnity
Guarantee
Object
Compensation of loss
Relief to Debtor
Existence of Liability
Not necessary
Necessary
Interest
No real interest
Real interest for surety
Consideration
Consideration is
present
No consideration for surety or SUFFICIENT
consideration for surety in the form of loan given to the debtor.

11. RIGHTS OF SURETY Right against the Creditor Right to Claim Securities
Right of set off
Right of subrogation
Right to demand termination of employee (fedelity insurance)

12. Revocation of Continuing Guarantee
By notice
By Death of Surety
By other modes :
Alteration without consent
Novation
Discharge of Debtor

13. Nature & Extent of surety’s liability
Secondary in nature
Contingent
Immediate in nature
Co- extensive
Surety may limit his liability
Liability in continuing guarantee
In case of void agreement, surety will still be liable. E.g. surety for agreement by a minor.

14. RIGHTS OF SURETY Right against the principal debtor
Right of SUBROGATION
Right of INDEMNITY

15. RIGHTS OF SURETY Right of contribution against Co- Sureties
Guarantee for equal amount: Equal Contribution in absence of contract (sec. 146)
Guarantee for different amounts: Burden of default to be shared upto respective amount of guarantee.(Sec 147)
Right ton share benefits of the securities.

16. DISCHARGE OF SURETY By notice By death of surety By novation
By Conduct of principal
By notice
By death of surety
By novation
By revocation

17. DISCHARGE OF SURETY By conduct of creditor By variation in the terms
Release or discharge of debtor
Compounding with principal debtor
By loss of security

18. DISCHARGE OF SURETY Guarantee obtained by misrepresentation
By Invalidation of Contract of Guarantee
Guarantee obtained by misrepresentation
By concealment
Failure of Consideration
Failure of Co-Surety to join

19. THANK YOU!!
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