Question 6 (b)
Indemnity and guarantee distinguished
9.375 marks
- Time to write
- About 19 minutes
From an older CBCS paper
Question
Question 6 (b) · 9.375 marksDefine indemnity and guarantee contract, and Differentiate between the two. Give examples too, bringing out the difference.
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
- Define…Give…2 asks, each with its own marks below. Answer both.
- Differentiate betweenSet the differences out in a table, basis by basis, not as two separate essays.
- examplesExamples are asked for: one short example with each point.
What the paper leaves open
Marked as one question of 18.75 marks; answered here in 2 parts of 9.375 marks each (marks inferred).
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Indemnity and guarantee 4.8 marks 9 min
- 2 Differences 4.6 marks 8 min
- Check: every ask answered, key terms underlined 1 min
Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.
Try it first. About 19 minutes for 9.375 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.
Indemnity and guarantee. In a contract of indemnity one party undertakes to protect the other against loss, whether caused by the promisor's own conduct or by anyone else's (s. 124); in a contract of guarantee one party undertakes to carry out the promise, or meet the liability, of a third person if he defaults (s. 126).
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.
Examples (our own), bringing out the difference:
- Indemnity: Sana's fixed-deposit receipt is lost, and her bank issues a duplicate only after she promises to make good any loss the bank suffers if the original is later presented. Two parties are involved, and Sana's promise answers for a loss that depends on whether the original turns up.
- Guarantee: Kabir borrows ₹2,00,000 from a co-operative bank to buy a tractor, and his uncle, at Kabir's request, promises the bank to repay the loan if Kabir does not. Three parties are involved, and the uncle pays only if Kabir, who is liable first, fails to.
| Basis | Indemnity | Guarantee |
|---|---|---|
| When liability arises | When the contingency against which protection was promised occurs | When an existing promise is not performed or an existing debt is not paid |
| Whose request | The indemnifier need not act at the request of the person indemnified | The surety acts at the principal debtor's request |
| Parties | Two: the indemnifier and the person indemnified | Three: the creditor, the principal debtor and the surety |
| Liability | Primary and unconditional | Secondary, and conditional on the principal debtor's default |
Where the 9.375 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Indemnity and guarantee | 4.75 |
| 2 | Differences | 4.625 |
| Total | 9.375 |
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