Law of Indemnity and Guarantee

1. GROUP NO. 5
PRESENTS..
LAW OF INDEMNITY
AND GUARANTEE

2. PRESENTED BY
1. Sneha Chouhan (21)
2. Vijaya Darne (23)
3. Alpita Dharshnia(25)
4. Mayank Dubbey(27)
5. Triveni Dunna(29)

3. CONTENTS
1. Introduction to business law
2. History
3. Law of indemnity
4. law of guarantee
5. conclusion

4. 1. Introduction to business law
• Business law encompasses all of the laws that dictate
how to form and run a business.
• Business Law is a body of principles which are framed
by the state in the administration of justice
• This includes all of the laws that govern how to start,
buy, manage and close or sell any type of business.

5. • Business laws establish the rules that all
businesses should follow.
• It is a code of conduct.
• It deals with rights and obligations of Business
persons with their rights and obligations arising
out of business transactions. It encompasses
various aspects of Law and business like Laws
on contracts, Companies, partnership,
Insurance, Sale of goods, corporate relations,
Negotiable instruments etc

6. 2. History
• The Indian Contract Act 1872 sections 1-
75 came into force on 1 September 1872.
It applies to the whole of India except the
state of Jammu and Kashmir
• Indian Contract Act, 1872 is the main
source of law
regulating contracts in Indian law, as
subsequently amended.

7. HISTORY….. (CONTD)
• It determines the circumstances in which promise
made by the parties to a contract shall be legally
binding on them. All of us enter into a number of
contracts everyday knowingly or unknowingly. Each
contract creates some right and duties upon the
contracting parties. Indian contract deals with the
enforcement of these rights and duties upon the
parties.

8. 3. Law of 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”.
E. g. A car insurance policy

9. • The person who promises to save the
other from loss is called indemnifier.
• The person whose loss is to be made
good is called indemnified or indemnity
holder

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

11. RIGHTS OF INDEMNITY HOLDER
o To claim damages
o To claim costs
o Other payments

12. Example-
• The receipt pertaining to certain goods is lost B
while travelling through Indian Railways. Now, A
claims the goods from Railway company. The
Railway Co. asked A to give an ‘indemnity bond’.
A gets the goods. Here A is indemnifier and
Railway Co is the indemnity holder. Later, B the
real owner sues the Railway Co.. Now, the co.
can claim indemnity from A, for the loss caused
by his conduct.

13. 4. LAW OF GUARANTEE
• “A contract of guarantee is a contract to perform
the promise or discharge the liability of a third
person in case of his default.”
• Eg- ‘A’ advances a loan of Rs 5000 to ‘B’ and ‘C’
promises to A that if ‘B’ doesn’t repay the loan,
‘C’ will do so. This is a contract of guarantee.

14. FEATURES
• Valid Contract ( essentials of Sec-10)
• Consideration for surety is loan given by creditor.
• Liability arises immediately when debtor makes
default.
• Implied Indemnity
• Right Of Subrogation
• Disclosure of Facts
• Form- Oral or Written
• Existence of Principal Debt.

15. KINDS OF GUARANTEE
• Specific
• Continuing

16. Revocation of Continuing Guarantee
By notice
By Death of Surety
By other modes :
Alteration without consent
Discharge of Debtor

17. 5. Conclusion
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
No. of Parties 2 3
No. of Contracts 1 3
Nature of Liability Primary Secondary

18. 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.