LAWACADEMY

  Contract of Guarantee Guarantee can be defined as an agreement by which one person undertakes to discharge the liability in case another person makes default. Section 126 defines 'Contract of Guarantee', 'Surety', 'Principal Debtor and 'Creditor. According to Section 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. The person who gives the guarantee is called the 'surety'. The person in respect of whose default the guarantee is given is called the 'principal debtor'. The person to whom the guarantee is given is called the creditor For example, 'A' asks 'B' to lend Rs 1 lac to C and undertakes a guarantee that if C fails to pay the amount 'A' will pay. This is a contract of guarantee in which 'A' is the surety, 'B' is the creditor and 'C is the principle debtor. Essential features of contract of guarantee:...

  Contract of Indemnity The term ' indemnify ' means to make good the loss of another in certain situations. It is a security against, or compensation for loss. Section 124 defines 'Contract of Indemnity'. It is a contract by which one party promises to save the other from loss caused to him:- (1) By the conduct of the promisor himself; or (i) By the conduct of any other person Parties in contract of indemnity:-There are two parties in a contract of indemnity- Indemnifier : the person who gives the indemnity. Indemnity-holder : the person for whose protection the indemnity is given. For example, 'P' contracts to indemnify 'Q' against the consequences of any proceedings which 'Y' may take against 'Q' in respect of a certain sum of Rs. 500. This is a contract of indemnity. A contract of indemnity is a direct contract between two parties i.e. indemnifier and indemnity holder. It is a contingent contract wherein the happening of the loss is ...