Contract of indemnification

Promises to save the other from loss caused to him by promisor or any other personRights of indemnified:-All damagesAll costsAll sums for any compromiseFor e.g. A and B go in to a shop. B says to the shopkeeper let A have the goods and he would pay for it.

Contract of indemnification

As per Indian Contract Act, indemnity should be:

Expressed and Loss should have caused by the promisor

himself or by the conduct of any other person.

But Indian Courts follow the English Law in case of indemnity where:

A contract of indemnity can be implied or expressed.

CONTRACT OF GUARANTEE

Meaning and Essentials

Acc to Sec 126 – It’s a Contract to perform the promise or to discharge the liability of a third person in case of his default.

Parties- Surety, Principal debtor, Creditor

Features of Guarantee Concurrence A person cannot become the surety without

the consent of the principal debtor. Primary liability in some person

No liability no contract of guarantee. For e.g. Time Barred debt

Consideration Writing not necessary Capacity to contract should be valid

Types of Guarantee (Sec 129)

Specific, Simple or Limited Guarantee: it extends to a single transaction.

For e.g.: A guarantees B that C would make payment of Rs.10,000 for the deliver of 10 pairs of shoes on 20th Sep. After the completion of obligations the guarantee would be discharged.

Continuing Guarantee: It extends to series of transactions. For e.g. A guarantees B for all the payments that the C would make to B for the delivery of shoes.

Types of Guarantee (Sec 129)

Revocation of Continuing Guarantee:

By Notice of Revocation (Sec 130) By Death of Surety. (Sec 131)

Nature and Extent of Surety’s Liability.

Liability of Surety is secondary It is coextensive with that of the

principle debtor- all costs (sec 128) i.e. Quantum of obligation of a surety

is the same (or less than if agreed) as that of the principal debtor.

Liability under continuing guarantee

Rights of Surety RIGHTS AGAINST CREDITOR: To insist the creditor to sue the principal

debtor, but surety will have to indemnify the creditor for any expenses or loss resulting therefrom.

Right to set – off. Right of Subrogation (Sec 140) Surety getting rights of principal debtor

after the payment of the guaranteed debt.

RIGHT AGAINST PRINCIPAL DEBTOR

Right to Indemnity (Sec 145) Right to be relieved of liability RIGHT AGAINST CO – SURETIES Co – Sureties to contribute equally. Liability of Co – Sureties bond in

different sums.

DISCHARGE OF SURETY Revocation by Novation Variance in terms of contract (M.S.

Anirudhun V. Thomco’s Bank Ltd.) Release or Discharge of principal

debtor. Composition, Extension of time and

Promise not to sue. Failure on part of some other persons to

join as co – sureties.

DISCHARGE OF SURETY Guarantee obtained by

misrepresentation Guarantee obtained by concealment.