Q. Contract Of Indemnity.

Ans.
INTRODUCTION — Contract of indemnity is one of the specie of general contract, therefore,
the general principles of law of contract is applicable to it. Chapter VIII Ss. 124 & 125 of
Indian Contract Act, 1872 deals with the provisions of indemnity.
DEFINITION — Section 124 : "Contract of indemnity" defined - 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".
There are two parties in contract of indemnity –
i) Indemnifier - He is the person who promises to make good the loss. He is also called as
the promisor.
ii) Indemnity Holder - He is the person to whom the promise of indemnity is given. He is the
person whose loss is to be compensated, is also called as promisee.
Rights of indemnity-holder when sued (Section 125) — The promisee in a contract of
indemnity, acting within the scope of his authority, is entitled to recover from the promisor :-
(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 authorised him to bring or defend the suit;
(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 promises to make in the absence of any
contract of indemnity, or if the promisor authorised him to compromise the suit.
CASE LAW — i) Gajanan Moreshwar vs. Moreshwar Madan (1942) : Bombay High Court
Judge J.Chagala made the observation that If the indemnified has incurred a liability and the
liability is absolute, he is entitled to call upon the indemnifier to save him from the liability and
pay it off.
CONCLUSION — A contract of indemnity is not exhaustive. A contract of indemnity is in real
sense a kind of contingent contract. It is a promise to save one from losses caused to him by
the conduct of promisee or any other person.
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Q. Contract Of Guarantee.
Ans.
INTRODUCTION — A contract of guarantee is a specific contract. It is a contract to perform
the promise or discharge the liability of a third person in case of his default. The contract of
guarantee is also called a contract of surety.
DEFINITION — Section 126 of the Indian Contract Act. 1872 provides for the definition of
contract of guarantee. surety, principal debtor and creditor as – "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". and the person to whom
the guarantee is given is called the "creditor", A guarantee may be either oral or written.
ESSENTIAL ELEMENTS — (1) Contract of guarantee is a specific contract,
(2) It is a contract comprising a promise to perform -
a) promise of third party;
 b) discharge the liability of third party.
(3) Performance arises in case of the default of the third party.
(4) Guarantee may be oral or written.
(5) There are three parties - surety, principal debtor and creditor.
KINDS OF GAURANTEE — Guarantee may be for a particular transaction known as
specific guarantee or may be for series of transactions known as continuing guarantee.
1. Specific or simple guarantee – When a guarantee is given for a single transaction or a
debt, it is called a specific or simple guarantee.
2. Continuing Guarantee – When a guarantee extends to a series of transactions it is
called as a continuing guarantee.A continuing guarantee is defined under section 129 of the
Indian Contract Act,1872.
DIFFERENCE BETWEEN INDEMNITY AND GAURANTEE —
A. Contract Of Indemnity – (1)The contract of indemnity is defined u/s 124 of Indian
Contract Act, 1872. (2)There are two parties in contract of indemnity i.e. person indemnifier -
promisor and person indemnified promisee/indemnity holder.(3)There is only one contract in
contract of indemnity i.e. between the indemnifier and indemnified. (4)The liability of the
indemnifier - promisor to the indemnified - promisee is primary and independent. (5)The
liability of the indemnifier arises only on the happening of a contingency.
B. Contract Of Guarantee – (1)Contract of guarantee is defined u/s 126 of Indian Contract,
Act, 1872. (2)There are three parties in the contract of guarantee i.e. the creditor, principal
debtor and the surety. (3) In contract of guarantee there are three contracts - a) between
principal debtor and creditor b) Principal debtor and surety c) surety and creditor. (4) The
liability of the surety to the creditor is collateral or secondary. The primary liability is of
principal debtor. (5)There is usually an existing debt or duty, the performance of which is
guaranteed by the surety.
CONCLUSION —
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Q. Contract Of Bailment.
Ans.
INTRODUCTION — Contracts of bailment are a special class of contract. These type of
contract deal within Chap. IX from Section 148 to 181 of the Indian Contract Act, 1872. The
Indian Contract Act, however, does not deal with all types of bailment.
DEFINITION — "Bailment", "bailor" and "bailee" defined – A "bailment" is the delivery of
goods by one person to another for some purpose, upon a contract that they shall, when the
purpose is accomplished, be returned or otherwise disposed of according to the directions of
the person delivering them. The person delivering the goods is called the "bailor". The
person to whom they are delivered is called the "bailee".
KINDS OF BAILMENT — On the basis of reward –
Gratuitous bailment :–The bailment of products without any charges or reward is
Gratuitous bailment.In this type,There is no requirement to pay any charges by the bailee for
the bailment.
Non gratuitous bailment :– The bailment for some reward or charges is Non gratuitous
bailment.It is required to pay some charges to the bailor by the bailee.
On the basis of benefit –
1. Bailment Contract made for the exclusive benefits of the bailor.
2. Bailment made for the exclusive benefits of the bailee
3. Bailment made for mutual benefits of both bailor and bailee
DUTIES OF BAILOR — 1.Duty to disclose all known faults-( sec 150): 2.Duty to bear
necessary and extraordinary expenses (Sec 158): 3.Duty to indemnify loss for premature
termination of bailment-Sec(159): 4.Duty to indemnify the bailee against the defective title
of the bailor (Sec164): 5.Duty to bear a loss (Sec162):
RIGHTS OF BAILOR — 1.Right to claim damages in cases of negligence from the bailee
[section 152]: 2.Right of termination of the contract in case of unauthorized use of goods
[sec 153]: 3. Right of compensation in case of the unauthorized use of goods [ICA sec
154]: 4.Right to claim compensation in case of the unauthorized mixture of the goods which
cannot be separated" [section 157]:
DUTIES OF BAILEE — 1.Duty to take due care of the respective goods delivered to
him[ICA Sec 151]. 2.Duty to not make unauthorized use of the respective good [ICA Sec
154] 3.Duty to not combine the mix bailed along with his own the respective [ICA sec 155 to
157] 4.Duty to return the goods [ICA Sec 160]. 5.Duty to deliver any accretion to goods
RIGHTS OF A BAILEE — 1.Right to claim the damages [ICA sec 150] 2.Right to claim
reimbursement of expenses if any [ICA sec 158] 3.Right to get indemnified if termination of
gratuitous bailment takes place [ICA sec 159] 4. Right to give bailed goods to any of the
bailors in case of joint bailment [ICA sec 165] 5.Right to recover damages for the losses in
case bailor refuses to take the goods back [ICA sec 164] 6.Right to deliver the goods to the
bailor in case of the title of bailor is defective [ICA sec 166] 7.Right to recover damages for
the loss in case title of bailor is defective[ICA sec 164]
TERMINATION OF BAILMENT — 1.After the fulfillment of the purpose. 2.When use of
goods becomes inconsistent. 3.When the subject matter of bailment gets destroyed.
4.Death of any party occurs. 5.When bailor terminates the bailment contract.
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Q. Contract Of Pledge.
Ans.INTRODUCTION — Section 172 to 179 deals with the provisions of pledge. A pledge
is also known as pawan. It is a special kind of bailment. A pledge is a bailment for security.
DEFINITION — S. 172 Defines Pledge as under "The bailment of goods as security for
payment of a debt or performance of a promise is called 'pledge. The bailor is, in the case,
called the 'pledger' or 'pawnor' and the bailee is called the pledgee' or 'pawnee'.
ESSENTIAL OF THE PLEDGE — There are three essential conditions of pledge
1.bailment of goods pledged :– The subject matter of the contract of pledge is goods,
capable of actual or constructive delivery. The goods loss will be identified at the time of the
contract. Any kind of existing goods, documents or valuable things of personal nature may
be pledged. A valid pledge of shares may be effected by delivery of share certificate.
Insurance policies, bonds, promissory notes, and savings passbooks can be pledged.
2. bailment by way of security :- It is the delivery of goods by the pawnor to the pawnee by
way of security upon a contract that they shall when the debt is paid or the promise is
performed, be returned or otherwise disposed of according to the direction of the pawnor.
3. security for payment of a debt :- Pawnor has taken a loan or debt from the pawnee and
for the security of the repayment of the loan and interest, the goods are delivered from
pawnor to pawnee.
DIFFERENCE BETWEEN BAILMENT AND PLEDGE —
A.PLEDGE — 1.Pledge is the bailment of goods as a security for performance of a specific
promise. i.e. the payment of a debt or performance of a promise. 2. In case of default by the
pawnor to repay the debt, the pawnee may after giving notice to the pawnor may sale the
goods pledged with him. 3. In case of pledge, the pawnee has no right to use the goods
pledged with him.
B. BAILMENT – 1.Bailment, on the other hand, is for purpose of any kind. 2.The bailee may
either retain the goods or sue for his charges. 3.In case of bailment, the bailee may do so if
the terms of bailment are provided.
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Q. Contract Of Agency.
Ans.
INTRODUCTION — Section 182 to 238 deals with provisions of contract of agency. Because
of the complexities of modern business, it is not possible for any man to transact all his
business by himself. He cannot personally attend to all mattes in which it is necessary for
him to be brought into legal relations with other people.
DEFINITION — Section.182. AGENT AND PRINCIPAL defined : An 'agent' is a person
employed to do any act for another or to represent anather in dealings with third persons.
The person for whom such act is done, or who is so represented, is called the principal.
ESSENTIALS OF RELATIONSHIP OF AGENCY There are two essentials of relationship of
agency -
(a) Agreement between the principal and the agent :– Agency depend upon
agreement but not necessarily on contract. As between the principal and third
persons any person may become an agent. Even a minor or a person of unsound
mind may be an agent. In such cases, the principal is liable for the acts of such an
agent. Even no consideration is necessary to create an agency.
(b) intention of the agent to act on behalf of the principal - In agency there must be
an intention that one who is authorized is to act for and on behalf of the principal
dealing with the third party.
(c) Consideration :- No consideration is necessary to create an agency.
(d) Capacity of the parties Principal must have attained the age of majority and must
be of sound mind. Whereas the minor or person of unsound mind can be an agent.
But such minor or sound
CONCLUSION — From the above discussion it is seen that agency is the relationship,
which exist between two persons one of whom expressly or impliedly consent that the other
should represent him or act on his behalf.
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Q. Grounds of Discharge of Surety.
Ans. MEANING OF DISCHARGE OF SURETY — Discharge of surety means the liability of
the surety comes to an end. It is a process whereby a surety is said to be discharged from
his liabilities'. In contract of guarantee the liability of the surety is co-extensive wherein he
promises to perform the promise of principal debtor for his default.
GROUNDS OF DISCHARGE OF SURETY — There are three main grounds under which
the surety is discharged :–
1. By revocation -The ground of revocation consists of three sub-heads a) revocation by
surety S.130, b) death of surety S.131, c) novation S.62.
2.By conduct of the creditor - 1.Variance in terms of contract S.133, 2.Release or
discharge of principal debtor S.134, 3.Compounding by creditor with principal debtor S.135,
4.Creditor's act or omission impairing sureties eventual remedy S.139, 5.Loss of security
S.141.
3. Invalidation of contract consists of four grounds - 1.Guarantee obtained by
misrepresentation, 2.Guarantee obtained by concealment, 3.Failure of Co-surety to join a
surety, 4.Failure of consideration.
CONCLUSION —