CONTRACT LAW 124 TO 147 PRESENTATION PPT.pptx

CONTRACT LAW 124 TO 147

1. Indemnity & Guarantee (Sections 124-147, Indian Contract Act, 1872)

2. Introduction to Indemnity & Guarantee Contracts of indemnity and guarantee are types of contingent contracts. Indemnity: One party promises to compensate another for a loss. Guarantee: A third party ensures the performance of a contract in case of default.

3. Indemnity Section (124-125) Definition of Indemnity (Section 124 Definition of Indemnity (Section 124) Definition: A contract where one party promises to save another from loss caused by a third party’s conduct. Example: A insurance contract where the insurer indemnifies the insured.

4. Essential Features of a Contract of Indemnity Two parties: Indemnifier & Indemnified. Protection against loss. Loss must be caused by a third party. Indemnity can be express or implied .

5. Rights of Indemnity Holder (Section 125) Indemnified party can recover: Damages paid in a lawsuit. Legal costs incurred in defending a case. Any amount paid under compromise, if done in good faith.

6. Definition of a Contract of Guarantee (Section 126) Definition: A contract where a third party (surety) promises to fulfill the debtor’s obligation if the debtor fails. Parties Involved: Principal Debtor – The one who borrows. Creditor – The one who lends. Surety – The guarantor.

7. Essential Features of a Contract of Guarantee Tripartite Agreement: Involves three parties. Liability of Surety: Secondary liability only. Consideration: A guarantee must be supported by valid consideration. No Misrepresentation or Concealment: Guarantee obtained by fraud is invalid.

8. Types of Guarantee Specific Guarantee: For a single transaction. Continuing Guarantee: Covers multiple transactions over time.

9. Rights of Surety (Section 140-145) Against Principal Debtor: Right to recover amount paid after settling the creditor. Against Creditor: Right to security held by the creditor. Against Co-Sureties: Right to contribution from co-sureties .

10. Discharge of Surety (Sections 130-144) By Revocation: Revoking the guarantee before liability is incurred. By Death: Surety’s liability ends (for future transactions). By Variance in Contract: Any change without surety’s consent discharges them. By Release of Principal Debtor: If the debtor is released, the surety is also discharged .

11. Differences Between Indemnity & Guarantee Feature Indemnity Guarantee Parties Involved Two (Indemnifier & Indemnified) Three (Creditor, Debtor, Surety) Nature of Liability Primary Secondary Scope of Protection Covers loss or damage Ensures performance of a contract Contingency Arises only when a loss occurs Arises when the debtor defaults