( Part – II Special Contracts )

CONTRACT
OF
INDEMNITY
Contract Of Indemnity
(Section 124)
INDEMNITY
Promises

To save
One party The other

Loss caused

By the conduct of the promisor himself or

by any other person
 Home

EXAMPLE Insurance

An insurance
contract, whereby
one party (the
insurer) agrees to
compensate the
other (the insured) Car Insurance
for any damages or
losses, in return for
premiums paid by
the insured to the
insurer. Cash Repairs Replacement Reinstatement
Payments Cost cost
Essentials of Contract of Indemnity

Loss to Lawful
Consideration Parties
Promisee

Operation of Law
Express or implied
 Rights of Indemnity Holder

All Damages All Costs All Sums Suit for Specific

Performance

Commencement of Liability of Indemnifier

As soon as the loss or Till the holder actually

injury to holder becomes suffer the loss or injury
imminent
 CONTRACT
OF
GUARANTEE
Contract Of Guarantee
(Section 126)

GUARANTEE

To
perform a
promise

OR

Discharge the In case of his

liability default
EXAMPLE Construction Industry

Y is in need of
Rs. 10000/-.
Upon guarantee
by Z, Y has got
the amount from 3 Parties
X. Here X, Y and
Z are creditor,
principal debtor
and surety
respectively.
 Essentials of Contract of Guarantee
1. Tripartite Privity of Contract
Essentials of Contract of Guarantee
(Conti…)

Consideration Liability Surety’s distinct

Legally enforceable
For Promise
liability
Guarantee To be
Answerable
 RIGHTS OF SURETY

Against
Principal
Debtors Against The
• Right Of Creditor Against The Co-
Subrogation • Before Payment Of
• Right To The The Principal Debt securities
Benefit Of • On The Payment
Creditor’s Of Principal Debt
Securities
• Right To Indemnity
 Liabilities of Surety

Minor
Can sue Debtor
General Operation of surety Death
Principal law without Suret Suret
suing debtor y is y not
liable liable
Discharge of Surety’s Liabilities
Notice of Revocation
Death
Variation
Without the consent
Compounds with or gives time not to sue
Creditors Act or Omission
Losing the Security
Misrepresentation or Concealment
Failure on the part of some person to join surety
 Contract of Indemnity Contract of Guarantee
1. Definition :
One party promises to save the other To perform the promise or discharge
from loss caused to him by conduct of the liability of third person in case of
other person. his default.
2. Parties :
Two parties – indemnifier Three parties – creditor
indemnity holder principal debtor
surety
3. Liability :
Primary & independent Secondary
4. Contract :
One contract Three contracts
-between indemnifier & indemnified -between principal debtor & creditor
-between creditor & surety
-between surety & principal debtor
 Contract of Indemnity
5. Aim of Contract :
Reimbursement of loss
(if any to be indemnified)
6. Act of indemnifier :
Not necessary to act at the request of
the indemnified
7. Contingency :
The liability arises only on the
happening of the event.
8. Discharge of Liability :
Indemnifier cannot sue a third party
for loss in his own name.
Contract of Guarantee
Security of creditor
Is necessary that the surety should
give guarantee at the request of the
debtor
There is usually an existing debt or
duty, the performance of which is
guaranteed by surety.
Surety, on discharging the debt due by
the debtor, steps into the shoes of the
creditor.
BAILMENT
 Contract Of
Delivery
Bailment of goods
(Section 148)

one person To another

Upon a contract

Goods

According to the directions of the

person delivering the goods
 Essentials of Bailment

Some purpose
Contract

Actual or Constructive

Consideration
Change of possession
Movable goods
 Classification of Bailment

Benefit
• Safe deposit
• Hire Rewards
• Commodation • Gratuitous
• Pledge • Non-gratuitous
• Minor debtor
• Repair
PLEDGE
 Contract Of Pledge (pawn)
(Section 172)

Bailment of Goods Payment of debt

 Essentials of Pledge

Movable property

Security
Juridical
Actual or constructive delivery Possession of
goods
 Bailment
1. Definition :
Delivery of goods for some purpose like
safe custody, hiring, repairing, etc
2. Use :
The bailee may use the goods bailed or
mix the goods with his own goods.
3. Sale :
Normally, the bailed does not sell the
goods bailed for realization of his dues,
though he has possessory lien on them.
4. Gratuitous / Non-Gratuitous :
General Bailment may be gratuitous.
5. Rights :
The bailor & the bailee have some
common right.
Pledge
Delivery of goods as security for debt or
performance of some promise
The pledgee cannot use the goods.
Normally, the pledgee is given the option
to sell the goods bailed to realize not only
the principal amount but also accrued
interest there on.
Pledge cannot be gratuitous.
The pledger and the pledgee have special
rights.