Presentation on Indemnity and guarantee

1. INDEMNITY AND GUARANTEE
GROUP MEMBERS: REG-NO:
• FAHAD UR REHMAN KHAN
• UROOSA BAIG
• SANNAN WASEEM
• MOHAMMAD ALI TAHIR
• SAJID AMINI
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SUBMITTED TO: SYEDA NAZNEEN WASIM
COURSE: BUSINESS LAW

2. Contract of Indemnity
• A contract by which one party promises to save
other from loss. In other words, security or
protection against a loss or other financial burden.
• The person Who Promises to recover loss is
Indemnifier (Promisor), and the person who lost
any of his goods are called Indemnity or the
promise.
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Parties to Contract of Indemnity

3. Essentials of Contract of Indemnity
• Special Contract
This contract should have essentials of all the Valid Contract.
• Loss of Party
A contract of indemnity can be performed only when the loss
has incurred to the promisee.
• Indemnity by promisor
The reason of this contract is to protect the Promisee
(Indemnity holder) from future loss.
• Reasons for loss
The reason or loss should be accidental, that the
damage should not be done by the promisor or
promisee.
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4. Rights of Indemnity Holder
• He has right to Recover Damages.
• He has right to Recover Cost of Suit.
• He has right to Recover Sums.
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For Example: If Mr. A had a Car, and one day during driving at
highway, he met a horrible accident, Which damaged most of his
car, and the car was Indemnified by Mr. C.
So, Mr. A has all the right to Recover damages, cost of suit or
sums.

5. CONTRACT OF GUARANTEE

6. Contract of Guarantee
• A contract in which a party promises to another party that he will perform the
contract or compensate the loss, in case of the default of a their person, it is the
contract of guarantee.
• Creditor (Who gives money)
• Principle Debtor (Who takes money)
• Surety (Who takes responsibility of the payments by Debtor)
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Parties to Contract of Guarantee

7. Difference between Indemnity and Guarantee
Indemnity Guarantee
Number of Parties 2 3
Number of Contracts 1 3
Nature Simple Complex
Recovery Direct Payer Surety
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8. Essentials of Contract of Guarantee 6
Tripartite Contract
It is a simple agreement between three people Debtor, creditor and surety. All the essentials
of the valid contract is required.
For Example:
If:
Then:
Mr Yasir
Takes a loan from
Mr Sannan
On the Surety by Mr Shoaib
Mr Yasir Fails to pay his Loan
Mr Shoaib has to pay his Loan
Mr Sannan

9. Essentials of Contract of Guarantee
• Consideration Contract
There must be some consideration by creditor. The Debtor has
to pay the consideration decided.
For Example:
If:
Then:
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Mr Yasir Takes a loan from Mr Sannan On the Surety by Mr Shoaib
Mr Yasir
Fails to pay his Loan
Mr Shoaib
has to pay his Loan with 5% intrest rate to
Mr Sannan

10. Essentials of Contract of Guarantee
• Misrepresentation
When the guarantee is misrepresented by the creditor.
For Example:
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Mr Yasir Gives Surety of Mr Sannan But Sannan was disqualified by law

11. Essentials of Contract of Guarantee
• Concealment
A contract of guarantee is not a contract of absolute good faith. Any
guarantee obtained by means of misrepresentation made by the creditor,
or with his knowledge and assent, concerning a material part of the
transaction is invalid.
• Writing not Necessary
In this, anyone can sale anything to anyone on the verbal surety.
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12. Kinds of Guarantee
• Specific Guarantee
A guarantee to a single debt or transaction is called specific guarantee.
Example:
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Mr Yasir
Takes 5 Begs of Wheat from
Mr Sannan
On the Surety by Mr Shoaib
Mr Yasir
Again Takes 5 Begs of Wheat
Mr Sannan
Mr Yasir But failed to pay
Mr Sannan Can not sue for second transaction Mr Shoaib

13. Kinds of Guarantee
• Continuing Guarantee
A guarantee which extended to more than one debt or transaction is called
continuing guarantee.
Example:
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Mr Yasir
Can buy food to the extent of 10k
Mr Sannan
On the Surety by Mr Shoaib
Mr Yasir Can do many transaction to the extent of 10k

14. Rights to Surety
1. Rights against the Creditor
A. Risk to Security:
In this, the creditor will take Mortgage, in terms of recovering
if the debtor fails to pay.
B. Risk to claim Set off:
In this, the debtor (who takes the loan or stuff) find anything
faulty, then he can have the discount from Creditor.
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15. Rights to Surety
• 2. Rights against Principle Debtor:
A. Rights of Subrogation
When, a surety pay instead of Debtor and claims the mortgage.
Example:
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Mr. Fahad Mr Adnan Mr Farhan
Mr. Fahad
Mr Farhan
Mr Farhan
Takes a loan with his car on mortgage Surety by
Fails to pay the loan
Will pay instead of Fahad to Mr Adnan
Will also take Fahad’s car Mr Adnan

16. Rights to Surety
• 2. Rights against Principle Debtor:
B. Rights of Indemnity
When, the creditor sues the surety and debtor in case of non payment.
Example:
If Mr Fahad fails to pay the payment.
Then Mr. B will sue the Surety to pay.
If Surety refuses to pay.
Then Mr. B sue Mr. Fahad
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17. Rights to Surety
3. Rights against Co-Surety:
When, there are more than one Surety. Are of Similar and Different amount.
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Investor
A B C
Surety Surety
Gives loan to

18. Discharge of Surety from Liability
1.Notice of Revocation
2.Death of Surety
3.Change in terms of contract
4.Release or Discharge of Debtor
5.Arrangement without Surety’s consent.
6.Creditor’s act or Omission.
7.Loss of security
8.Invalidation of contract
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19. THANK YOU!