This document provides an overview of contracts of indemnity and guarantee under business law. It defines indemnity as a contract where one party promises to save the other from loss caused by the promisor or a third party. Guarantee is defined as a contract to perform a third party's promise in case of default. The key differences between the two are that indemnity involves two parties while guarantee involves three parties, and a surety's liability under guarantee is secondary while it is primary under indemnity. The document outlines the rights and duties of parties under these contracts as well as circumstances for discharging obligations.

1. Business Law presentation on:
CONTRACT OF
INDEMNITY
AND
GUARANTEE
Ajit kumar
BBA
75148114

2. INDEMNITY
Definition:SEC. 124-
A contract by whichone party promises to save the
other from loss caused to himby the conduct of the
promisor himself, or by the conduct of any other
person, is called a “Contract of Indemnity”.
E. g. A car insurance policy

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

4. INDEMNITY
Rightsof IndemnityHolder:
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 theliability,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
PrincipalDebtor- For whom guaranteeis given
Creditor- To whomguaranteeis given

7. GUARANTEE
Features
 Valid Contract ( essentials of Sec-10)
 Consideration forsurety is loan given by creditor.
 Liability arises immediatelywhendebtor makes default.

8. GUARANTEE
 ImpliedIndemnity
 RightOfSubrogation
 Disclosure of Facts
 Form-Oral or Written
 ExistenceofPrincipalDebt.

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
himby theconduct of the
promisor himself, or by
the conduct of any other
person, is called a
“Contract of Indemnity”.
A “Contractof Guarantee”
is a contracttoperform
the promise,or
dischargetheliability,of
athirdpersonin caseof
his default.
Section 124 126
No.ofParties 2 3
No.ofContracts 1 3
Nature ofLiability Primary Secondary

10. Difference b/w Indemnity &
Guarantee
Basis Indemnity Guarantee
Object Compensationofloss Relief toDebtor
Existence ofLiability Notnecessary Necessary
Interest Noreal interest Realinterestforsurety
Consideration Considerationis present Noconsiderationforsurety
orSUFFICIENT consideration
forsuretyin theformofloan
given tothe debtor.

11. KINDS OF GUARANTEE
 Perspective
 Retrospective
 Specific
 Continuing

12. Revocation of Continuing
Guarantee
By notice
By DeathofSurety
By othermodes:
Alterationwithoutconsent
Novation
DischargeofDebtor

13. Nature & Extent of surety’s
liability
Secondary in nature
Contingent
Immediatein nature
Co- extensive
Surety may limit his liability
Liability in continuingguarantee
In case of void agreement, surety willstillbe liable. E.g.
surety for agreementby a minor.

14. RIGHTS OF SURETY
Right against the principaldebtor
 Right of SUBROGATION
 Right of INDEMNITY

15. RIGHTS OF SURETY
Right against the Creditor
 Right to ClaimSecurities
 Rightof set off
 Right to share reduction
 Right to demand terminationof employee (fedelity
insurance)

16. RIGHTS OF SURETY
Right ofcontributionagainst
Co- Sureties
 Guarantee for equal amount:
Equal Contribution
 Guarantee for different amounts:
Burden of defaultto be sharedequallyup to
respective amountof guarantee.

17. DISCHARGE OF SURETY
By Revocation
By notice
By death ofsurety
By novation

18. DISCHARGE OF SURETY
By conduct of creditor
By variation in theterms
Release or discharge of debtor
Compoundingwithprincipal debtor
Impairing Surety’s remedy
By loss of security

19. DISCHARGE OF SURETY
By Invalidation ofContract of Guarantee
Guarantee obtained by misrepresentation
By concealment
Failure of Consideration
Failure of Co-Surety to join

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