All Courses
Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity Get the App Login Join for Free
Sign in Open App
CLAT Exam  >  CLAT Questions  >   Indemnity and Guarantee are a type of contin... Start Learning for Free
Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.
In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.
Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. is
  • a)
    Indemnity Contract
  • b)
    Contract of guarantee
  • c)
    Neither Indemnity Contract nor Contract of Guarantee
  • d)
    Cannot be determined
Correct answer is option 'A'. Can you explain this answer?
Clear all your CLAT doubts with EduRev
Verified Answer
Indemnity and Guarantee are a type of contingent contracts, which are...
This is an example of an indemnity contract.
View all questions of this test
Explore Courses for CLAT exam

Similar CLAT Doubts

The question is based on the reasoning and arguments, or facts and principles set out in the passage. Some of these principles may not be true in the real or legal sense, yet you must conclusively assume that they are true for the purpose. Please answer the question on the basis of what is stated or implied in the passage. Do not rely on any principle of law other than the ones supplied to you, and do not assume any facts other than those supplied to you when answering the question. Please choose the option that most accurately and comprehensively answers the question.The term indemnity literally means security against loss. In a contract of indemnity, one party, i.e. the indemnifier, promise to compensate the other party, i.e. the indemnified, against the loss suffered by the other. The English law defines a contract of indemnity as a promise to save a person harmless from the consequences of an act. Thus, it includes within its ambit losses caused not merely by human agency, but also those caused by accident or fire or other natural calamities. As per Section 124 of the Contract Act, a contract of indemnity is that contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.The definition provided by the Indian Contract Act confines itself to the losses occasioned due to the act of the promisor or due to the act of any other person. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself, or as per the terms in the indemnity contract. Every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency.Section 124 deals with one particular kind of indemnity which arises from a promise made by an indemnifier to save the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not depend upon the conduct of indemnifier or any other person.In a contract of indemnity, there are two parties, i.e. indemnifier and indemnified. A contract of guarantee involves three parties, i.e. creditor, principal debtor and surety. An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor. In a contract of indemnity, the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee, the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q.A takes credit from B for starting a new business and on the insistence of B, A appoints C as surety. As business venture was immensely hit by the recession in the market and he fails to pay his dues. B sues C for the money which he owes from A. Decide.

Directions: Read the following passage and answer the question.The term indemnity literally means security against loss. In a contract of indemnity, one party, i.e. the indemnifier, promise to compensate the other party, i.e. the indemnified, against the loss suffered by the other. The English law defines a contract of indemnity as a promise to save a person harmless from the consequences of an act. Thus, it includes within its ambit losses caused not merely by human agency, but also those caused by accident or fire or other natural calamities. As per Section 124 of the Contract Act, a contract of indemnity is that contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.The definition provided by the Indian Contract Act confines itself to the losses occasioned due to the act of the promisor or due to the act of any other person. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself, or as per the terms in the indemnity contract. Every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency.Section 124 deals with one particular kind of indemnity which arises from a promise made by an indemnifier to save the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not depend upon the conduct of indemnifier or any other person.In a contract of indemnity, there are two parties, i.e. indemnifier and indemnified. A contract of guarantee involves three parties, i.e. creditor, principal debtor and surety. An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor. In a contract of indemnity, the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee, the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. A takes credit from B for starting a new business and on the insistence of B, A appoints C as surety. A's business venture was immensely hit by the recession in the market and he fails to pay his dues. B sues C for the money which he owes from A. Decide.

Directions: Read the following passage and answer the question.The term indemnity literally means security against loss. In a contract of indemnity, one party, i.e. the indemnifier, promise to compensate the other party, i.e. the indemnified, against the loss suffered by the other. The English law defines a contract of indemnity as a promise to save a person harmless from the consequences of an act. Thus, it includes within its ambit losses caused not merely by human agency, but also those caused by accident or fire or other natural calamities. As per Section 124 of the Contract Act, a contract of indemnity is that contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.The definition provided by the Indian Contract Act confines itself to the losses occasioned due to the act of the promisor or due to the act of any other person. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself, or as per the terms in the indemnity contract. Every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency.Section 124 deals with one particular kind of indemnity which arises from a promise made by an indemnifier to save the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not depend upon the conduct of indemnifier or any other person.In a contract of indemnity, there are two parties, i.e. indemnifier and indemnified. A contract of guarantee involves three parties, i.e. creditor, principal debtor and surety. An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor. In a contract of indemnity, the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee, the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.[Extracted with edits and revision from Contract of Indemnity, article by taxmanagementindia]Q. A assures B that he will indemnify him if his house is harmed by fire. However, B carelessly ignites a firecracker within his residence, resulting in the destruction of his house. Now, B intends to seek indemnity. Can B request reimbursement?

The question is based on the reasoning and arguments, or facts and principles set out in the passage. Some of these principles may not be true in the real or legal sense, yet you must conclusively assume that they are true for the purpose. Please answer the question on the basis of what is stated or implied in the passage. Do not rely on any principle of law other than the ones supplied to you, and do not assume any facts other than those supplied to you when answering the question. Please choose the option that most accurately and comprehensively answers the question.The term indemnity literally means security against loss. In a contract of indemnity, one party, i.e. the indemnifier, promise to compensate the other party, i.e. the indemnified, against the loss suffered by the other. The English law defines a contract of indemnity as a promise to save a person harmless from the consequences of an act. Thus, it includes within its ambit losses caused not merely by human agency, but also those caused by accident or fire or other natural calamities. As per Section 124 of the Contract Act, a contract of indemnity is that contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.The definition provided by the Indian Contract Act confines itself to the losses occasioned due to the act of the promisor or due to the act of any other person. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself, or as per the terms in the indemnity contract. Every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency.Section 124 deals with one particular kind of indemnity which arises from a promise made by an indemnifier to save the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not depend upon the conduct of indemnifier or any other person.In a contract of indemnity, there are two parties, i.e. indemnifier and indemnified. A contract of guarantee involves three parties, i.e. creditor, principal debtor and surety. An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor. In a contract of indemnity, the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee, the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q.A promises B to indemnify him in case his house is damaged by fire. B negligently lights up a firecracker in his house and burns it down. Now B wants to claim indemnity. Can B claim the reimbursement?

The question is based on the reasoning and arguments, or facts and principles set out in the passage. Some of these principles may not be true in the real or legal sense, yet you must conclusively assume that they are true for the purpose. Please answer the question on the basis of what is stated or implied in the passage. Do not rely on any principle of law other than the ones supplied to you, and do not assume any facts other than those supplied to you when answering the question. Please choose the option that most accurately and comprehensively answers the question.The term indemnity literally means security against loss. In a contract of indemnity, one party, i.e. the indemnifier, promise to compensate the other party, i.e. the indemnified, against the loss suffered by the other. The English law defines a contract of indemnity as a promise to save a person harmless from the consequences of an act. Thus, it includes within its ambit losses caused not merely by human agency, but also those caused by accident or fire or other natural calamities. As per Section 124 of the Contract Act, a contract of indemnity is that contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.The definition provided by the Indian Contract Act confines itself to the losses occasioned due to the act of the promisor or due to the act of any other person. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself, or as per the terms in the indemnity contract. Every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency.Section 124 deals with one particular kind of indemnity which arises from a promise made by an indemnifier to save the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not depend upon the conduct of indemnifier or any other person.In a contract of indemnity, there are two parties, i.e. indemnifier and indemnified. A contract of guarantee involves three parties, i.e. creditor, principal debtor and surety. An indemnity is for reimbursement of a loss, while a guarantee is for security of the creditor. In a contract of indemnity, the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee, the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q.A hires B to kill C. A and B enter into an indemnity agreement, wherein B will be reimbursed if B is hurt or injured in the process of killing C. B gets hurt when he tries to kill C. Can B claim the reimbursement?

Top Courses for CLATView all

Top Courses for CLAT

Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer?
Question Description
Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? for CLAT 2025 is part of CLAT preparation. The Question and answers have been prepared according to the CLAT exam syllabus. Information about Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CLAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CLAT. Download more important topics, notes, lectures and mock test series for CLAT Exam by signing up for free.
Here you can find the meaning of Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Indemnity and Guarantee are a type of contingent contracts, which are governed by Contract Law. Simply put, indemnity implies protection against loss, in terms of money to be paid for loss. Indemnity is when one party promises to compensate the loss occurred to the other party, due to the act of the promisor or any other party. On the other hand, the guarantee is when a person assures the other party that he/she will perform the promise or fulfill the obligation of the third party in case he/she defaults. When it is about securing one’s interest while entering into the contract, people mostly go for a contract of indemnity or guarantee. At first instance, these two will appear same, but there are some differences between them. Indemnity contract is a form of contingent contract, whereby one party promises to the other party that he will compensate the loss or damages occurred to him by the conduct of the first party or any other person, it is known as the contract of indemnity. In indemnity, there are two parties, indemnifier and indemnified. The purpose of indemnity contract is to compensate for the loss. A contract in which a party promises to another party that he will perform the contract or compensate the loss, in case of the default of a person, it is the contract of guarantee. In the contract of guarantee, there are three parties i.e. debtor, creditor, and surety. The purpose of contract of guarantee is to give assurance to the promise.In Punjab National Bank v Vikram Cotton Mills case, it was held that under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. And in Gajanan Moreshwar v Moreshwar Madan it was held that every contract of insurance, other than life insurance, is a contract of indemnity. The definition is restricted to cases where loss has been caused by some human agency. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favour. Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.Q. Joe is a shareholder of Alpha Ltd. who lost his share certificate. Joe applies for a duplicate one. The company agrees, but on the condition that Joe compensates for the loss or damage to the company if a third person brings the original certificate. The contract for the contingent compensation between Joe and Alpha Ltd. isa)Indemnity Contractb)Contract of guaranteec)Neither Indemnity Contract nor Contract of Guaranteed)Cannot be determinedCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CLAT tests.
Explore Courses for CLAT exam

Top Courses for CLAT

Explore Courses
SaveJoin the Discussion on the App for FREE
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Get App
© EduRev
Education Revolution
Signup to see your scores go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup