Question 5
Short notes: indemnity and guarantee; termination of agency; void and illegal agreements
18 marks
- Time to write
- About 36 minutes
- Notes
- Crux notes
Question
Question 5 · 18 marksWrite a short note on any three of the following:
Contract of Indemnity versus Contract of Guarantee.
Whistle blowing as provided in the LLP Act, 2008.
Provisions on Termination of Agency
Void versus Illegal agreements
Rules on change of the name of an LLP firm (6×3=18)
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
- any threeAnswer any 3 of the 5, 6 marks each. Only 3 are marked: a fourth earns nothing.
- short noteA note opens with the meaning, then two or three key points. No long introduction.
Write it in this order
The parts stand alone: start with the one you are surest of.
- Read; underline the asks; jot your points 2 min
- 1 (a) Indemnity versus guarantee 6 marks 11 min
- 2 (c) Termination of agency (ss. 201–202) 6 marks 11 min
- 3 (d) Void versus illegal agreements 6 marks 10 min
- Check: every ask answered, key terms underlined 2 min
Easy marks
- Choose the ones you know best: each carries the same marks.
Short on time? A few lines on every part beat a full answer to one: each part is capped at its own marks.
Try it first. About 36 minutes for 18 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.
Notes are written on three of the five topics: (a), (c) and (d).
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.
(a) Contract of Indemnity versus Contract of Guarantee
| Point of distinction | Contract of Indemnity | Contract of Guarantee |
|---|---|---|
| Number of parties | Two: the indemnifier (promisor) and the indemnified (promisee) | Three: the creditor, the principal debtor and the surety |
| Nature of liability | The indemnifier's liability is primary and unconditional | The surety's liability is secondary and conditional, the primary liability being the principal debtor's |
| Time of liability | Arises only on the happening of a contingency | Arises only on non-performance of an existing promise or non-payment of an existing debt |
| Request | The indemnifier need not act at the request of the indemnity holder | The surety acts at the request of the principal debtor |
(c) Provisions on Termination of Agency. Under section 201 of the Indian Contract Act, 1872, an agency is terminated:
- by the principal revoking his authority;
- by the agent renouncing the business of the agency;
- by the business of the agency being completed;
- by either the principal or the agent dying or becoming of unsound mind; or
- by the principal being adjudicated an insolvent.
Exception (s. 202). Where the agent himself has an interest in the property that “forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of” that interest: if A authorises B to sell A's land and pay himself, out of the proceeds, the debts A owes him, A cannot revoke the authority, and A's death or insanity does not end it.
(d) Void versus Illegal agreements.
- Void agreement: an agreement not enforceable by law (s. 2(g)). It is not forbidden by law, it is not necessarily illegal, and the parties to it incur no punishment.
- Illegal agreement: one whose object or consideration is unlawful. It is forbidden by law, it is always void, and the parties to it are liable to punishment.
- Hence every illegal agreement is void, but a void agreement is not necessarily illegal.
Where the 18 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | (a) Indemnity versus guarantee | 6 |
| 2 | (c) Termination of agency (ss. 201–202) | 6 |
| 3 | (d) Void versus illegal agreements | 6 |
| Total | 18 |
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