Q-3 Distinguishes between the contract of indemnity and contract of guarantee.
Ans: Both contracts may be distinguished in the following case:
1- DIPPERENCE IN MEANING
(a) . In the contract of guarantee one person give guarantee for the performance of the contract.
(b) In the contract of indemnity one person promises to save the other from any loss.
2- DIFFERENCE IN THE NUMBER OF PARTIES
(a) Under the contract of indemnity there are two parties.
(b) Under the contract of guarantee three are three parties.
3- DIFFERENCE IN LIABILITY
(a) Under indemnity contract the basic liability falls on the indemnifies
(b) In.case of guarantee contract surety has the liability.
4- DIFFERENCE IN THE NUMBER OF CONTRACTS
(a) Under the indemnity contract there is one contract only.
(b) Under the contract of guarantee there must be at least three contracts.
5- DIFFERENCE IN TNE NATURE OF INTEREST
(a) In case of guarantee he has no any other interest except guarantee.
(b) In case of indemnity contract, Indemnifier has the interest in the earning commission and premium.
6- DIFFERENCE IN RIGHT OF CLAIM
(a) Guarantee is entitled to proceed against the principle debtor in his own name if he has paid the debt.
(b) The indemnifier cannot sue the third party in his own name.
7- DIFFERENCE IN THE PERFORMANCE OF CONTRACT
(a) Contract of indemnity depends upon the possibility of risk or loss.
(b) In case of guarantee there is an existing debt or duty of performance about which guarantee is given.
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MODE OF CONTRACT OF INDEMNITY
A contract of indemnity may be express or implied.
(a) A contract of indemnity is said to be express when a person expressly promises to compensate the other from loss.
(b) A contract of indemnity is said to be implied when it is to be inferred from the conduct of the parties or from the circumstances of the case.
X an auctioneer, sold certain goods at the instruction of Y. Later on, it is discovered that the goods belonged to Z and not Y. Z recovered damages from X for selling his goods. Here, X is entitled to recover the compensation from Y because there was an implied promise to compensate the auctioneer for any loss, which he may suffer on the defective title of goods sold by auction.
ESSENTIAL ELEMENTS OP CONTRACT OP INDEMNITY
In addition to the implied or express promise to indemnify, all the essentials of a valid contract must also be present. 0
X asks Y to beat Z and promises to indemnify Y against the consequences. Y beats Z and is fined Rs.1,000/=. Y cannot claim this amount from X because the object of the agreement was unlawful.