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WHAT IS THE CONTRACT OF

INDEMINITY, CONTIGENT
CONTRACT, N GURARENTEE,
COMPARE THEIR FUTURE?

CONTINGENT CONTRACT
DEFINITION
Section 31. of the Contract Act, 1872 defines "Contingent
contract" as A "contingent contract" is a contract to do or not to
do something, if some event, collateral to such contract, does or
does not happen.

Essentials of contingent contract


All contracts of insurance and indemnity are obviously
contingent.
Contingent contracts are enforced on happening of an event
(Section 32).
Contingent contracts are not enforced on an event not happening
(Section 33).
Contingency basically is dependent on act of party.

.
COLLATERAL EVENT

Collateral event means connected event.


Not part of consideration but part of contract

Example
if I offer a reward for the recovery of lost goods, there is not a
contingent contract; there is no contract at all unless and until some
one, acting on the offer, finds the goods and brings them to me.

PERFORMANCE OF CONTINGENT
CONTRACTS
HAPPENING OF EVENT

Depends on happening of a future event


Cannot be enforce un till that event happen

.
Non Happening of Event

Contingent contract is enforceable if an un certain future


event does not happen

Un Certain Agreement

Meanings or terms are not certain


The terms of contract are not capable of being certain

WAGERING AGREEMENT

Wager means a bet. An agreement to pay money or money


worth on happening or non happening of event
Each party has equal chance to win or lose the bet
Parties should not have any other interest other than
amount

ESSENTIAL OF WAGER

Promise to pay money or money worth


Depends on happening or non happening of event
One party is to win, other is to lose
Parties should not have any other interest other than
amount

CONTRACT OF INDEMNITY
A contract of indemnity is a contract by which 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
(Section 124).

Essentials of contract of indemnity

Contain all essentials of valid contract


Contract between two parties
Promise to save the loss of other person which may he suffer
Express or implied
Parties in a contract of indemnity: There are two parties. One
is indemnifier, who promises to make good the loss, and the
other is indemnified or indemnity holder, the one whose loss is
made good (Section 124).


Rights of Indemnity Holder:
Damages are paid all damages which he may
be compelled to pay in any suit in respect of any
matter to which the promise to indemnify applies.
Cost of suit All costs which he may be
compelled to pay brining or defending such suit.
Compromise payment An indemnity holder can
compromise a claim on the best term he can and
then bring an action on the contract of indemnity
(Section 125).


Rights of indemnifier:

Rights of the indemnifier are analogous to the


rights of a surety under Section 141.
Indemnifier, on making good the indemnity, be
entitled to succeed to all the ways and means by
which the person indemnified might have
protected himself against or reimbursed himself
for the loss.

Contract of guarantee
A contract of guarantee is a contract to perform the promise or
discharge the liability of a third person in case of his default.

Example: A requests B to lend Rs. 1000 to C and guarantees


if C does not pay the amount, he will pay. This is contract of
guarantee.

Parties to a contract of guarantee


Surety The person who gives guarantee
Creditor The person to whom guarantee is given
Principal Debtor The person in respect of whose default the
guarantee is given.

Agreements within
Contract of Guarantee

Contract of guarantee comprises of three collateral


contracts:

Between creditor and principal debtor, there is a contract


out of which the guaranteed debt arises.
Between surety and creditor, there is a contract by which
surety guaranteed to pay to creditor, principal debtors debt
in case of default.
Between surety and principal debtor, there is a contract
that principal debtor shall indemnify surety in case surety
pays in the event of default by principal debtor.

Essentials of Contract of
Guarantee

Tripartite contract
Consent of all three parties is necessary
Absence of consent of any of them no contract is made.
Liability must be legally enforceable. If the liability does not
exist, there cannot be a contract of guarantee.
A contract of guarantee must meet all the requirements of
a valid contract.
But if a principal debtor goes mad in that case surety is
regarded as the principal debtor and is liable personally
Writing is not necessary and it can be oral or written.

Difference between Indemnity


and guarantee
Indemnity
Number of parties
Two parties involve
Indemnifier and indemnity
holder

Number of contract
One contact is involve

Nature of Liability
Liability of indemnifier is
primary and independent

Request
Indemnifier promise with
out request of Other party

Guarantee
Three parties, creditor,
principal debtor, surety
Three contracts involved
between contacting parties
Liability of surety is
secondary

Debtor requests to surety to


give the guarantee

.
Existence of Liability

Liability of indemnifier
arises on happening of
event

Filling of suit

Indemnifier cannot suit the


third party for loss

Purpose

Basic purpose is to save


the person from loss

Liability of surety already


exists
Performance is guaranteed
by surety
Surety after paying to
creditor can sue against
the principal debtor
Security of debt
Performance of Contract

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