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Wednesday, 10 August 2011

Distinguish or Difference between the Contract of Indemnity and Contract of Guarantee

Both contracts may be distinguished in the following cases :

1. Difference in Meaning :-

Contract of indemnity : In the contract of indemnity one person promises to save the other from any loss.

Contract of guarantee : In the contract of guarantee one person gives guarantee for the performance of the contract.



2. Difference in the Number of Parties :-

Contract of indemnity : Under the contract of indemnity there are two parties.

Contract of guarantee : Under the contract of guarantee there are three parties.



3. Difference in the Liability :-

Contract of indemnity : Under indemnity contract the basic liability falls on the indemnifies.

Contract of guarantee : In case of guarantee contract surety has the secondary liability.



4. Difference in the Number Of Contracts :-

Contract of indemnity : Under the indemnity contract there is one contract only.

Contract of guarantee : Under the contract of guarantee there must be at least three contracts.



5. Difference in the Nature of Interest :-

Contract of indemnity : In case of indemnity contract, indemnifies has the interest in earning commission and premium.

Contract of guarantee : In case of guarantor he has no any other interest except guarantee.



6. Difference in the Right of Claim :-

Contract of indemnity : The indemnifies cannot sue the third party.

Contract of guarantee : Guarantor is entitled to proceed against the principal debtor in his own name. If he has paid the debt.



7. Difference in the Performance of Contract :-

Contract of indemnity : Contract of indemnity depends upon the possibility of risk or loss.

Contract of guarantee : In case of guarantee there is an existing debt or duty performance about which guarantee is given.

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