Special Contracts: Indemnity,Guarantee,Bailment and Pledge


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Special Contracts: Indemnity,Guarantee,Bailment and Pledge

  2. 2. CONTRACT OF INDEMNITY  Meaning and Definition of Indemnity Section 124 defines a contract of indemnity as “A contract of indemnity is a contract whereby 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. Definition of Indemnity under Section 124 is restrictive.
  3. 3. FEATURES OF INDEMNITY     It must possess all ingredients of a valid agreement. It is a contingent agreement to make good the loss. The loss must be caused by human conduct only. Loss must have actually been suffered. PARTIES TO CONTRACT OF INDEMNITY INDEMNIFIER: INDEMNITY HOLDER: Examples: Motor insurance Marine insurance Fire insurance Life insurance is not the contract of indemnity
  4. 4. RIGHTS OF INDEMNITYHOLDER WHEN SUED    All Damages All Costs All Sums RIGHTS OF INDEMNIFIER The contract act is silent about the rights of indemnifier.
  5. 5. Contract of Guarantee  Meaning and Definition A contract of guarantee is defined by the Indian Contract Act, as “A contract to perform the promise or discharge the liability of a third person in case of his default.” A guarantee may be either oral or written. [section 126].
  6. 6. ESSENTIALS OF CONTRACT OF GUARANTEE: Existence of a principal debt. Consideration for a contract of guarantee. There should be no misrepresentation or concealment. Contract of guarantee must contain all the essential elements of valid contract. Contract of guarantee is a complete and separate contract by itself. PARTIES TO CONTRACT OF GUARANTEE SURETY: PRINCIPAL CREDITOR: DEBTOR:
  7. 7. TYPES OF GUARANTEE  SPECIAL GUARANTEE A guarantee is a “specific guarantee”, if it is intended to be applicable to a particular debt and thus comes to an end on its repayment.  CONTINUING GUARANTEE A guarantee which extends to a series of transactions is called a “continuing guarantee”, e.g., (i) fidelity guarantee, (ii) overdraft.
  8. 8. RIGHTS OF SURETY AGAINST THE PRINCIPAL DEBTOR Right of subrogation Right to indemnity AGAINST THE CREDITOR Right Of Securities Right To Claim Set Off AGAINST THE CO-SURETIES When several co-sureties have given guarantee for the same debt with their maximum limits, they are liable to pay equally but subject to the limits they have fixed
  9. 9. DISCHARGE OF SURETY Revocation by notice. Revocation by death. Discharge of surety by variance in terms of contract. Discharge of surety by release or discharge of principal debtor. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor. Creditor's forbearance to sue does not discharge surety. Release of one co-surety does not discharge other. Discharge of surety by creditor's act or omission impairing surety's eventual remedy. By the creditor losing his security. By concealment or misrepresentation.
  10. 10. CONTRACT OF BAILMENT What is Bailment? Section 148 defines Bailment as: “The delivery of goods by one to another person for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.” The person delivering the goods is called the ‘Bailor’, and the person to whom goods are delivered is called the ‘Bailee
  11. 11. ESSENTIALS AND LEGAL RULES AS TO BAILMENT:        Contract: Delivery of Goods: No Transfer of Ownership: Delivery of Goods for Some Purpose: Return of Specific Goods: Movable Goods: Deposit of Money Into Bank:
  12. 12. Kinds OF Bailment On the basis of benefit    Bailment exclusive for Bailor’s benefit. Bailment exclusive for Bailee’s benefit Bailment for mutual benefit. On the basis of willingness   Voluntary Bailment Involuntary bailment On the basis of Rewards   Gratituous Bailment    Non-Gratituous Bailment
  13. 13. Rights Of Bailor       Right of indemnity for losses due to negligence by bailee[S.152] Termination of bailment on inconsistent use by the bailee[S.153] Compensation for unauthorised use by the bailee[S.154] Compensation when the bailee mixes the goods bailed with own goods [S.155] Right of return of goods back[S.160] Right to profit from goods bailed[S.163] Duties Of Bailor To Disclose faults in goods bailed [S.150] To repay the necessary expenses [S.158] To indemnify the bailee [S.164] Liability on premature breach of bailment[S.159]
  14. 14. Right Rights Of Bailee to compensation for loss on account of fault in goods bailed[S.150] Right to receive necessary expenses[S.158] Right against premature termination of bailment[S.159] Right to compensation in case of defective title[S.164] Delivery of goods to one of the joint owners[S.165] Right against third parties Duties Of Bailee Take reasonable care of goods[S.151] Not to make unauthorized use of goods[S.154] Not to mix goods with his own goods[S.155-157] Duty to return goods[S.160&161] Not doing any act inconistent Returning any profit [S.163] with terms of bailment[S.153]
  15. 15. CONTRACT OF PLEDGE OF PAWN  Section 172    “Pledge is the bailment of goods as security for payment of debt or performance of a promise.” Bailment of goods as a security for payment of debts or performance of promise is called pledge. The bailor is called pledgor or pawnor and the bailee is called Pawnee.   
  16. 16. ESSENTIALS OF PLEDGE:   Delivery of Goods:  Delivery of goods should be by way of security..  Goods must be movable.  RIGHTS AND DUTIES OF PAWNEE Right of retainer {S.173}: Right of particular lien Right to extraordinary expenses {S.175} Right in case of default of the pawnor RIGHTS AND DUTIES OF PAWNOR Right of redemption Right to take back the goods.
  17. 17. PLEDGE BY NON OWNERS  Pledge by mercantile agent  Pledge by person in possession under voidable contract  Pledge where pawnor has only a limited interest  Pledge by co-owner in possession  Pledge by seller or buyer in possession after sale .