Education and Career Forum

What is the difference between the contract of indemnity and contract of guarantee? Can you please provide me the right information on this and let me know the details as soon as possible? Awaiting to get the response soon. Thank you!

Contract of indemnity
-In the contract of indemnity one person promises to save the other from any loss
-Under the contract of indemnity there are two parties.
-Under indemnity contract the basic liability falls on the indemnifies.
- Under the indemnity contract there is one contract only.
- In case of indemnity contract, indemnifies has the interest in earning commission and premium.
-The indemnifies cannot sue the third party.
-Contract of indemnity depends upon the possibility of risk or loss.

Contract of guarantee
-In the contract of guarantee one person gives guarantee for the performance of the contract.
-Under the contract of guarantee there are three parties.
-In case of guarantee contract surety has the secondary liability.
- Under the contract of guarantee there must be at least three contracts.
-In case of guarantor he has no any other interest except guarantee.
-Guarantor is entitled to proceed against the principal debtor in his own name. If he has paid the debt.
- In case of guarantee there is an existing debt or duty performance about which guarantee is given.

Contract of Indemnity :
It is a contract in which one person promises the other person to save the other person from any loss.

Let us assume if there is a Contract of Indemnity between A and B.

If B is going to incur any loss due to legal proceedings, that has to be bear by A because there is a contract of Indemnity by A against B.

Contract of Guarantee :
As the name suggests, it is a Guarantee.

Here one person gives Guarantee to other person.

Let us assume A has given certain amount of money to B.

So, B has to pay that money back to A.

Now C has given Guarantee to A which means if B is unable to repay the money to A, C will have to pay.

There are only 2 parties in the Contract of Indemnity but there are 3 parties in Contract of Guarantee.

Contract of guarantee is defined as a contract between two people and a third party is introduced incase one of the party fails to pay,hence he is giving guarantee or assurance that if he fails he will be held liable and contract of indemnity is defined as a contract in which two parties enters into contract and they promise each other incase of loss that they would save each other.