Question 2 (b)
Contract of indemnity and contract of guarantee
6 marks
- Time to write
- About 12 minutes
From an older CBCS paper
Question
Question 2 (b) · 6 marksDifferentiate between contract of indemnity and contract of guarantee.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Differentiate betweenSet the differences out in a table, basis by basis, not as two separate essays.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Meaning of each contract 2 marks 2 min
- 2 Differences 4 marks 8 min
- Check: every ask answered, key terms underlined 1 min
Easy marks
- Meaning of each contract (step 1, 2 marks): a clear definition and a line on what it covers. It opens the answer, so it takes a minute or two.
Short on time? Cut step 2 short rather than leave anything out.
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Meaning. Under section 124, in a contract of indemnity one party undertakes to protect the other against loss, whether the loss arises from the promisor's own conduct or from what someone else does. Under section 126, in a contract of guarantee one party undertakes to carry out the promise, or meet the liability, of a third person if that person defaults: the one giving the guarantee is the surety, the one whose default is covered is the principal debtor, and the one to whom it is given is the creditor.
1Rain ruins the stored crates; the godown keeper pays Dinesh for the loss himself, as promised.
IndemnityThe promisor undertakes to make good a loss the promisee may suffer.
2Three people now: the borrower comes up empty, and his surety steps forward to answer for him.
GuaranteeThe promisor (the surety) undertakes to answer for a third person, the principal debtor, if that person fails to pay or perform what he owes to the creditor.
| Basis | Indemnity | Guarantee |
|---|---|---|
| Parties | Two: indemnifier and indemnified | Three: creditor, principal debtor and surety |
| Number of contracts | One | Three: creditor–debtor, creditor–surety, and an implied one between surety and debtor |
| Nature of liability | Primary | Secondary: arises only on the principal debtor's default |
| Purpose | To save from loss | To secure a debt or the performance of a promise |
| Request | The indemnifier need not act at the indemnified's request | The surety acts at the principal debtor's request |
| Right to sue third parties | The indemnifier cannot sue third parties in his own name unless the indemnified assigns that right to him | The surety, on paying, steps into the creditor's shoes |
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Meaning of each contract | 2 |
| 2 | Differences | 4 |
| Total | 6 |
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