25 February, 2016

Distinction between Contract or Indemnity and Guarantee


S.No.
Basis of Difference
Contract of Indemnity
Contract of Guarantee
1.











2.




















3.













4.






5.











6.













7.











8.
Number of
Parties










Number of
contracts



















Nature of  Liability












Purpose of contract





Scope of contract










Consideration













Origin of The liability










Remedy



In case of contract of Indemnity there are only Guarantee there are two parties, viz.(i) One who is indemnified and (ii) the other the indemnifier.

In case of contract of Indemnity there is only one contract between the indemnity holder (Indemnified) and indemnifier.











In a contract of Indemnity, 'the   liability of Indemnifier is primary there is no secondary liability.







A contract of indemnity exists for the reimbursement of loss.


The scope of contract of Indemnity is narrower than contract of Guarantee As it  does not include the contract of Guarantee.


In case of contract of In case of contract of indemnity' valuable consideration is available consideration is available to the indemnifier from to the surety from the very beginning.

The liability of the indemnifier asises only in case of the actual loss of suffered by the Indemnity holder'




The Indemnity holder is entitled not entitled to sue' third party for whose sake the loss is caused

In case of contract of Guarantee there are three parties, viz.(i) Principal debtor, (ii) Creditor, and (iii) Surety.


In case of contract of Guarantee there are three contracts; one is between the creditor and the principal debtor; another between the surety and the creditor, and the third between the surety and the principle debtor.

In a contract of Guarantee the primary liability is that of principal debtor, the surety is, liable only secondarily, i.e. if the debtor does not pay.

A contract of guarantee stands for the security of the creditor.

The scope of contract of Guarantee is wider than that of contract of Indemnity as it includes contract of Indemnity also.

The liability of the surety arise only when the the principal debtor commits the default in making the payment to the creditor.



The liability of the surety arises only when the principle debtor commits the default in making the payment to the creditor.

The creditor is entitled sue the surety' in case the principal debtor commits the default.



Courtesy:- Legal Point Foundation

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