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B Com Exam  >  B Com Tests  >  Business Law  >  Test: Law of Indemnity and Guarantee - B Com MCQ

Test: Law of Indemnity and Guarantee - B Com MCQ


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10 Questions MCQ Test Business Law - Test: Law of Indemnity and Guarantee

Test: Law of Indemnity and Guarantee for B Com 2024 is part of Business Law preparation. The Test: Law of Indemnity and Guarantee questions and answers have been prepared according to the B Com exam syllabus.The Test: Law of Indemnity and Guarantee MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Law of Indemnity and Guarantee below.
Solutions of Test: Law of Indemnity and Guarantee questions in English are available as part of our Business Law for B Com & Test: Law of Indemnity and Guarantee solutions in Hindi for Business Law course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Law of Indemnity and Guarantee | 10 questions in 20 minutes | Mock test for B Com preparation | Free important questions MCQ to study Business Law for B Com Exam | Download free PDF with solutions
Test: Law of Indemnity and Guarantee - Question 1
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What is the literal meaning of the term "Indemnity"?

Detailed Solution for Test: Law of Indemnity and Guarantee - Question 1
The term "Indemnity" literally means "Security against loss." It refers to a promise made by one party, called the indemnifier, to compensate the other party, called the indemnified, for any loss suffered. Example: If A promises to indemnify B against any financial loss that B may incur due to a certain event, it means that A will provide security to B against that loss. If B does suffer a loss, A will compensate B for it.
Test: Law of Indemnity and Guarantee - Question 2
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According to English law, what is the definition of a contract of indemnity?

Detailed Solution for Test: Law of Indemnity and Guarantee - Question 2
According to English law, a contract of indemnity is defined as a promise to save a person from loss caused by the conduct of the promisor himself or by the conduct of any other person. This definition includes losses caused not only by human agency but also by accidents or natural calamities. Example: If A promises to indemnify B against any loss caused by the conduct of C, it means that A will compensate B for the loss suffered due to C's actions.
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Test: Law of Indemnity and Guarantee - Question 3
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Under a contract of indemnity, the liability of the promisor arises from loss caused to the promisee by the conduct of:

Detailed Solution for Test: Law of Indemnity and Guarantee - Question 3
Under a contract of indemnity, the liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of any other person. This means that the indemnifier is responsible for compensating the indemnified for losses caused by their own actions or by the actions of others. Example: If A promises to indemnify B against any loss caused by the conduct of C, it means that A will compensate B for the loss suffered due to C's actions. Similarly, if A himself causes a loss to B, A will still be liable to compensate B under the contract of indemnity.
Test: Law of Indemnity and Guarantee - Question 4
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Which type of contract is considered a contract of indemnity?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 4
Every contract of insurance, other than life insurance, is considered a contract of indemnity. This means that in insurance contracts such as fire insurance, property insurance, or liability insurance, the insurer promises to compensate the insured for any loss suffered. The definition of a contract of indemnity in this context is restricted to cases where loss has been caused by some human agency. Example: If A has fire insurance for his property and it gets damaged in a fire, the insurance company will indemnify A by compensating him for the loss suffered.
Test: Law of Indemnity and Guarantee - Question 5
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According to the Indian Contract Act, a contract of indemnity covers losses caused by:
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 5
The definition of a contract of indemnity as provided by the Indian Contract Act is more specific. It states that a contract of indemnity covers losses caused to the indemnified by the conduct of the promisor himself or by the conduct of any other person. This includes losses caused by human agency as well as accidents or natural calamities. Example: If A promises to indemnify B against any loss caused by the conduct of C or by a natural disaster, it means that A will compensate B for the loss suffered in either of these situations.
Test: Law of Indemnity and Guarantee - Question 6
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What is the nature of a contract of indemnity?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 6
A contract of indemnity can be either an express or implied contract, depending on the circumstances of the case. Although Section 124 of the Indian Contract Act does not specifically mention implied indemnity, the nature of a contract of indemnity allows for both types of contracts. Example: An express contract of indemnity could be a written agreement between two parties where one promises to compensate the other for any loss suffered. On the other hand, an implied contract of indemnity may arise from the actions or conduct of the parties involved, indicating an understanding that one party will be held harmless from any loss caused by the other.
Test: Law of Indemnity and Guarantee - Question 7
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Under what circumstances can an indemnity agreement be considered valid?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 7
An indemnity agreement, like any other contract, is considered valid when there is free consent between the parties and a lawful object. This means that the parties must enter into the agreement willingly, without any coercion, fraud, or misrepresentation. Additionally, the object or purpose of the agreement must be lawful and not against the law or public policy. Example: If A and B freely agree to a contract of indemnity, where A promises to compensate B for any loss suffered, and the purpose of the agreement is legal, the indemnity agreement would be considered valid.
Test: Law of Indemnity and Guarantee - Question 8
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What is the right of the indemnity holder (indemnified) under a contract of indemnity?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 8
The indemnity holder, also known as the indemnified, has certain rights under a contract of indemnity. These rights include the right to recover damages, the right to recover costs, and the right to recover sums paid under compromise. The indemnified is entitled to these rights as long as they have acted within the scope of their authority. Example: If A promises to indemnify B against any loss caused by the conduct of C, and B is compelled to pay damages or incur costs in a lawsuit due to C's actions, B can exercise their rights as the indemnity holder to recover these amounts from A.
Test: Law of Indemnity and Guarantee - Question 9
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What is the liability of the indemnifier under a contract of indemnity?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 9
The liability of the indemnifier under a contract of indemnity is twofold. Firstly, the indemnifier is liable to compensate the indemnified for any loss caused by their own conduct. Secondly, the indemnifier is also liable to compensate the indemnified for any loss caused by any other person. This means that the indemnifier is responsible for both their own actions and the actions of others. Example: If A promises to indemnify B against any loss caused by the conduct of C or by their own actions, A will be liable to compensate B for the loss suffered in either of these situations.
Test: Law of Indemnity and Guarantee - Question 10
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What rights does the indemnifier have under a contract of indemnity?
Detailed Solution for Test: Law of Indemnity and Guarantee - Question 10
While Section 125 of the Indian Contract Act only mentions the rights of the indemnified, it can be inferred that the indemnifier has the same rights as a surety. This means that the indemnifier, like a surety, has the right to succeed to all the ways and means by which the indemnified might have protected themselves against or reimbursed themselves for the loss. Example: If A indemnifies B against any loss caused by C, and B is able to recover some of the loss from C, the indemnifier (A) would have the right to claim that amount from B, just like a surety would in a similar situation.
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