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Indemnity and guarantee
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A brief note about indemnity and guarantee
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INDEMNITY AND GUARANTEEThe contract of indemnity and contract of guarantee are specific types of
contracts. The
provisions relating to these contracts are contained in Sections 124 to 147
(Chapter VIII) of the
Indian Contract Act, 187.
Meaning and Definition of Contract of Indemnity
Ordinarily, the term indemnity means to make good any loss or to
compensate any person
who has suffered some loss. According to Section 124 of the Indian
Contract Act, “A 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, is called a
contract of indemnity”. The
person who makes the promise to make good the loss is called the
indemnifier. The person
whose loss is to be made good is called indemnity holder.
A contract of indemnity refers to a promise made by one person to make
good any loss or
damage another has incurred or may occur by acting at his request or for
his benefit. As such, a
contract of indemnity is a type of contingent contract. The performance of
the contract is
dependent on happening or non-happening of a contingency, which may
cause losses to another
party. A contract of indemnity may be express or implied.
Essentials of the Contract of Indemnity
The definition of a contract of indemnity in Section 124 of the Indian
Contract Act makes it clear
that, besides having the basic elements of a valid contract, a contract of
indemnity must have the
following two elements:
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