By :

Dr. Vilas Kulkarni.

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INDEX

Contracts of Indemnity.
Contracts of Gaurantee.
Surety & Co Surety.
Agency.

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 Contracts of Indemnity.
   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".
Eg - A contract to indemnify B against the
consequences of any proceedings
which C may take against B in respect
of a certain sum of 20000/- rupees. 
This is a contract of indemnity.
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Essentials of Contract of Indemnity.

• It must contain all the essentials of a

valid contract.
• The promisee or the Indemnity holder
must have suffered loss.

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Rights of indemnity holder
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 any  such suit if, in bringing or
defending it, he did not  contravene the
orders of the promisor, and acted as it
would have  been prudent for him to act in
the absence of  any  contract  of
indemnity,  or if the promisor authorized
him  to  bring  or defend the suit. 5
Continued…
3)   All sums which he may have paid
under the terms of any compromise of
any such suit, if the compromise was
not contrary to the orders of the
promisor, and was one which it would 
have been  prudent for the promisee
to make in the absence of any
contract of indemnity, or if the
promisor authorized him to
compromise the suit.
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Contracts 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 lends money to B and C

promises A that if B fails to repay he
will pay the money.
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Continued…
• 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“.
• A guarantee may be either oral or
written.
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Essentials of a Guarantee

1. There must be a debt existing,

which should be recoverable.
2. Existence of 3 parties ie. Principal
debtor, creditor & surety.
3. There should be some consideration
4. The liability must be legally
enforceable.

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Continued…

5. The principal debtor must be

primarily liable. Surety’s liability is
secondary.
6. There must be a distinct promise,
oral or written by the surety to pay
the debt in case of default by
principal debtor.
7. All essentials of a contract.
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 Rights of Surety
• Rights of Subrogation (Right of surety
against principal debtor).-
When the surety pays gauranted sum
to creditor on behalf of principal debtor,
he owns all the rights of the Creditor.
• Rights to indemnity - Surety is entitled
to recover from the principal debtor
whatever sum he has rightfully paid
under the guarantee, but, no sums
which he has paid wrongfully 11
Continued…

• Rights to benefit of Creditors Securities

A  surety is  entitled to the benefit of
every security which the  creditor  has
against  the  principal  debtor

• To be contributed equally in case

where two or more persons are
co-sureties.
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Agency

An "agent" is a person employed to

do any act for another or to represent
another in dealings with third
persons. 
The person for whom such act is
done, or who is so represented, is
called the "principal".

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Creation of Agency.

Agency can be created as under:

1. Agency by agreement.
2. Agency by necessity.
3. Agency by estoppel or by holding
out.
4. Agency by operation of Law.
5. Agency by ratification.

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Ratification of Agency

Ratification is adopting or accepting

subsequently a past act of an agent
done on behalf of another without
authority.

Rules governing ratification.

The act must be done by one person
on behalf of another.
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Continued…

Ratification may be expressed or may

be implied in the conduct of the
person on whose behalf the acts are
done.
No valid ratification  can be made by
a person whose knowledge of the
facts  of the case is materially
defective.

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Continued…

Ratification must be communicated.

Ratification can be for whole contract
and not part of it.
Ratification should not put a third
party to damages.
Ratification must be done within
reasonable time.

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Classification of Agents.

Specific or particular agent.

General agent.
Mercantile agent.
Sub-Agent.
Co-Agent.
Substitute Agent.

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Agent's authority
The authority of an agent may be expressed
or implied.
An agent having an authority to do an act
has authority to do every lawful thing which is
necessary in order to do such act.
An agent has authority, in an emergency, to
do all such acts for the purpose of protecting
his principal from loss as would be done by a
person of ordinary prudence, in his own case,
under similar circumstances.

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Revocation of Agents Authority.

The  principal may revoke  the 

authority  given  to his agent at  any 
time  before  the authority has been
exercised so as to bind the principal.
Revocation of authority terminates the
agents authority.

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Continued...

The principal  cannot  revoke the

authority in following cases –
• When agent has partly exercised the
authority.
• Where agency is coupled with
interest.
• When agent is personally liable.

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Termination of agency

   An  agency is  terminated  by  the principal 

revoking  his  authority; or by the  agent 
renouncing  the business  of  the  agency; 
or by the business  of  the  agency  being
completed;  or by either the principal or
agent dying or  becoming  of unsound
mind; or by the principal being adjudicated
an insolvent under the  provisions of any
Act for the time being in force for the  relief
of insolvent debtors.
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Agent's duty to principal

An agent  is bound  to  conduct  the

business of his principal according
   to  the directions  given by the principal
 An agent is bound to conduct the
business  of the agency with as  much 
skill  as  is generally possessed by
persons engaged in similar business

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Continued…

To render proper accounts.

To pay sums to principal received for
him.
To communicate with principal.
Not to make secret profits from
agency.

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Rights of Agent.

To retain out of any sums received on

account  of the principal, all moneys
due to himself.
To lien.
To indemnity.
To receive compensation in respect
of injury caused to him by the
principal's neglect or want of skill.
To appoint substitute agent. 25
Principal’s Rights.

To repudiate Contract.
To demand accounts.
To refuse renumeration to agent who
is guilty of misconduct.
To claim loss of profit sustained by
him.
To revoke agents authority.

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THANK YOU !!!

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