CONTRACTS

CONTRACTS OF

INDEMNITY

AND

GUARANTEE
MEANING:

 SPECIAL KIND OF CONTRACT .

 GENERAL PRINCIPAL OF FORMATION AND

DISCHARGE ARE APPLICABLE.

 ACCORDING TO SECTION 124 THE

CONTRACT OF INDEMNITY IS BEEN
DEFINED.
DEFINITION:

 ACCORDING TO SECTION 124

“CONTRACTS BY WHICH ONE
PRATY 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”
RIGHTS OF INDEMNITY HOLDER:
 SECTION 124 ENTITLES THE INDEMNITY TO RECOVER
FOLLOWING FROM THE PROMISOR:

 1 ALL DAMAGES MADE WHICH HE MAY BE COMPELLED TO PAY

IN A SUIT IN RESPECT MATTER TO WHICH THE PROMISE TO
INDENMIFY APPLIES.

 2 ALL THE SUM WHICH HE MAY HAVE PAID UNDER THE TERMS
OF ANY COMPROMISE OF ANY SUCH SUIT.

 3 AII THE COST WHICH HE MAY BE COMPELLED TO PAY IN

BRINING SUCH SUIT PROVIDED HE ACTS IN SUCH A WAY AS A
PRUDENT .
COMENCEMENT OF INDEMNIFIERS
LIABILITY

 THERE IS NO PROVISON IN THE CONTRACT

ACT DEALING WITH COMENCEMENT OF
INDEMNIFIERS LIABILITY.
CONTRACT OF GUARANTEE

 CONTRACT TO PERFOM THE PROMISER OR

TO DISCHARGE THE LIABILITY OF A THIRD
PERSON IN CASE OF HIS FAULT
 .
PERSON GIVING GUARANTEE IS CALLED
SURETY.

 THE PERSON ON WHOM BEHALF THE

GUARANTEE IS GIVEN IS CALLED PRINCIPAL
DEBTOR.
REQUISITES OF A VALID
GUARANTEE
 PRINCIPAL DEBT : THERE MUST BE A PRINCIPAL DEBT, PRESENT OR
FUTURE FOR WHICH THE PRIMARY LIABILITY MUST BE OF THE PRINCIPAL DEBT.
 CONSIDERATION: ANY PROMISE MADE FOR THE BENEFIT OF
PRINCIP[AL DEBT MAY BE SUFFICIENT CONSIDERATION TO
THE SURETY FOR GIVING THE GUARANTEE.
 COMPETENT PARTIES:N,LBOTH CONTRACTING PARTIES
SHOULD BE COMPETANT NOT MINOR BUT PRINCIPAL DEBT
MAY BE MINOR.
 NO MISPRESENTATION: ACCORDING TO SECTION 143 ANY
GUARANTEEE WHICH THE CREDITOR HAS OBTAINTED BY
MEANS OF KEEPING SILENCE AS TO MATERIAL
CIRCUMSTANCE IS INVALIDS.
CONT

 SURETYS LIABILITY IS CONDITIONAL:THE LIABI

LITY OF SURETY COMMENCES ONLY WHEN
THE PRINCIPAL DEBTOR MAKES A “DEFAULT”.
 CONCURRENCE OF ALL THE THREE PARTIES:
THE SURETYS SHOULD UNDERTAKE TO BE
LIABLE ON THE DEFAULT OF PRINCIPAL
DEBTOR, THE SURETY PROMISE MUST BE
GIVEN TO THE CREDITOR.
 WRITING NOT COMPULSORY:CONTRACT OF
GUARANTEE MAY BE ORAL OR WRITTEN.
DIFFERENCE BETWEEN
INDEMNITY
 TWO PARTIES ARE INCLUDED IN
CONTRACT.
 LIABILITY OF INDEMNIFIER IS
PRIMARY IN NATURE.
 ONLY ONE CONTRACT FORMED
BETWEEN TWO PARTIES.
 REQUEST:NOT REQUIED FOR
INDEMNIFIER TO ACT .
 EXISTENCE OF RISK:LIABILITY OF
INDEMNIFIER ARIES ONLY WHEN
HAPPENING OF CONTINGENCY.
 RIGHTS OF PARTIES:IND CANNOT
BRING A SUIT AGAINST A THIRD
PARTY IN HIS OWN NAME UNLESS
THERE IS ASSIGNMENT OF CLAIM IN
GUARANTEE
 THREE PARTIES ARE INCLUDED IN
CONTRACT.
 LIABILITY OF SURETY IS SECON
DARY.
 THREE CONTRCAT ARE FORMED.
 THERE IS A EXISTING LIABILITY THE
PERFORMANCE OF IS GUARANTED
BY SURETY.
 THE SURETY CAN PROCED
AGAINST THE PRINCIPAL DEBTOR
IN HIS OWN RIGHT AFTER
DISCHARGING THE LIABILITY OF
THE PRINCIPAL DEBTOR.
TYPES OF GUARANTEE

 RETROSPECTIVE GUARANTEE:GUARANTEE
FOR EXISTING DEBT.
 PROPECTIVE GUARANTEE: GUARANTEE FOR
THE FUTURE DEBT.
 SPECIFIC GUARANTEE:GUARANTEE COVERING
SINGLE OR SPECIFIC TRANSACTION.
 CONTINUING GUARANTEE:GUARANTEE
WHICH EXTENDS TO A SERIES OF
TRANSACTIONS OVER APERIOD OF TIME.
THANK YOU
BY:K. SURESH KRISHNAN REDDY,1-
SEM MBA