Indemnity and Guarantee - Law of Contract - Lecture Slides, Slides of Contract Law

Download Indemnity and Guarantee - Law of Contract - Lecture Slides and more Slides Contract Law in PDF only on Docsity! INDEMNITY AND GUARANTEE Definition not exhaustive Section 124 of the Indian Contract Act does not give an exhaustive definition of contracts of indemnity. This section Includes (i) only express promises to indemnify and (ii) only those cases where the loss arises from the conduct of the promisor or of any other person. It does not include (i) implied promises to indemnify and (ii) cases where loss arises from accidents and events not depending on the conduct of any person. Characteristics Characteristics (or the requisites) of a Contract of indemnity are as follows : 1. A contract of guarantee must satisfy all the essential elements of a contract. For example, the object must be lawful, there must be free consent etc. 2. The Contract may be express or implied. An express contract is by word or by writing. An implied contract of indemnity comes from the circumstances of the` case or the relationship between the parties. 3. Section 69 implies a promise to indemnify Rights of the Indemnity-holder Section 125 of the Contract Act lays down that the indemnity-holder is entitled to get from the indemnifier : 1. all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies ; 2. all costs which he may be compelled to pay in such suits (provided he acted prudently or with the authority of the indemnifier) ; 3. all sums which he may have paid upon compromise of such suit (provided the compromise was prudent or was authorized by the indemnifier). Docsity.com INDEMNITY AND GUARANTEE CONTRACTS OF GUARANTEE Classification Contracts of guarantee may be of three types : (1) for payment to the Creditor to the Principal Debtor by the Guarantor ; (2) payment of price for goods sold, and (3) fidelity guarantee A contract of guarantee may be for (1) a future debt or obligation or for (2) an existing debt. A guarantee can also be (1) a Simple Guarantee or (2) a Continuing Guarantee Essentials of a Valid Guarantee 1. A contract of guarantee must satisfy all the essential elements of a contract. (For example, the object must be lawful ; there must be free consent etc.) But the following points are to be noted. 2. A contract of guarantee may be either oral or written. Sec 126. 3. In a contract of guarantee there are three parties i.e., the creditor, the principal. debtor and the surety. All the parties must join the contract. 4. In a contract of guarantee, the primary liability is that of principal debtor. The liability of surety arises only when there is a default of the principal debtor. Therefore, the liability of the surety is secondary. 5. in a contract of guarantee the principal debtor may be a minor. In this case the surety is liable to pay even though the minor may not be. The contract will be enforced as between the surety and the creditor. 6. Consideration Docsity.com