law of indemnity

1. SPECIAL CONTRACTSSPECIAL CONTRACTS
CONTRACT OF INDEMNITY
{SEC. 124 & 125 }
CONTRCAT OF GUARANTEE
{SEC. 126 TO 147 }
CONTRACT OF BAILMENT
{SEC. 148 TO 181 }
CONTRACT OF PLEDGE

2. CONTRACT OFCONTRACT OF
INDEMNITYINDEMNITY
 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. 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 OFPARTIES TO CONTRACT OF
INDEMNITYINDEMNITY
INDEMNIFIER:
INDEMNITY HOLDER:
Examples:
Motor insurance
Marine insurance
Fire insurance
Life insurance is not the contract of indemnity

4. RIGHTS OF INDEMNITY-RIGHTS OF INDEMNITY-
HOLDER WHEN SUEDHOLDER WHEN SUED
 All Damages
 All Costs
 All Sums
RIGHTS OF INDEMNIFIERRIGHTS OF INDEMNIFIER
The contract act is silent about the rights of
indemnifier.

5. Contract of GuaranteeContract 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. ESSENTIALS OF CONTRACT OF GUARANTEE: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 GUARANTEEPARTIES TO CONTRACT OF GUARANTEE
SURETY:
PRINCIPAL DEBTOR:
CREDITOR:

7. TYPES OF GUARANTEETYPES 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. RIGHTS OF SURETYRIGHTS 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. DISCHARGE OF SURETYDISCHARGE 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. CONTRACT OFCONTRACT OF
BAILMENTBAILMENT
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. ESSENTIALS AND LEGALESSENTIALS AND LEGAL
RULES AS TO BAILMENT: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. Kinds OF BailmentKinds 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. Rights Of BailorRights Of Bailor
Duties Of BailorDuties 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]
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. Rights Of BaileeRights Of Bailee
Right 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 BaileeDuties 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 with terms of bailment[S.153]
Returning any profit [S.163]

15. CONTRACT OF PLEDGE OF PAWNCONTRACT 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. ESSENTIALS OF PLEDGE:ESSENTIALS OF PLEDGE:
Delivery of Goods:
Delivery of goods should be by way of security..
Goods must be movable.
RIGHTS AND DUTIES OF PAWNEERIGHTS 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 PAWNORRIGHTS AND DUTIES OF PAWNOR
Right of redemption
Right to take back the goods.

17. PLEDGE BY NON OWNERSPLEDGE 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
.