CONTRACT – II

UNIT -1 – GUARANTEE CONTRACT

Indemnity- promise one to another to save the injury caused, it can be physical, mental, breach
injury caused.
Section 124 – 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, is a “contract of
indemnity”.
Contract by one person to make good for any loss or damage to another party while acting at his
request or for his benefit.
Contract of indemnity – reimburse / save from loss or damage.
Parties to the contract
Indemnity holder – person who hold the claim for indemnity.
Indemnifier – who gives the indemnity.
English law on indemnity.
English usage of the word indemnity is much wider than this definition. It include the promises
to save the promisee harmless from loss caused by events or accidents which do not or may not
depend on the conduct of any person, or by liability arising from something done by the promise
at the request of the promisor; in the latter case a promise of indemnity may be inferred as a fact
from the nature of the transaction. The promise may be express or it may be implied from the
circumstance of the case.
“Loss can be natural or unnatural human interference can be foreseen or which cannot be
foreseen”
All insurance contracts are indemnity contract except life.
Halsbury’s law on England.
An indemnity is a contract, express or implied to keep a person, who has entered into or who is
about to enter into, a contract incur any other liability, indemnified against loss, independently of
the question, whether a third person make default.
Loss of damage = any loss even if not made from the direction of the party
Case law 1: Adamson v. Jarvis, 1872
Facts:
The plaintiff, an auctioneer, sold certain cattle on the instruction of the defendant. It
subsequently turned out that the livestock did not belong to the defendant, but to another person,
who made auctioneer liable and the auctioneer in his turn sued the defendant for indemnity for
the loss he had thus suffered by acting on the defendant’s direction.
Decision:
The court laid down that the plaintiff having acted on the request of the defendant was entitled to
assume that, if, what he did, turned out to be wrongful, he would be indemnified by the
defendant. There is implied guarantee contract between the plaintiff and the defendant.
The promise may be expresses or implied based on the circumstance. Principal and agent
relationship.

Contract of indemnity

 It is a contract by which one party promises

 To save one from loss caused
 By the conduct of the promisor himself or by the conduct of any other person.
Indian position – only human interference.
English position – through any agent.
Indian law is narrower the English position
This provision incorporates a contract where one party promises to save the other from loss
which may be caused, either

 By the conduct of the promisor himself, or,

 By the conduct of any other person,
This definition covers indemnity for loss caused by the human agency only. It does not deal with
the clauses of cases where the indemnity arises from the loss cases by events or accidents which
do not or may not depend upon the conduct of the indemnifier or any other person, or by reason
of liability incurred by something done by the indemnified at eh request of the indemnifier.
Case law 2: Privy Council in secy of state for india in council v bank of India ltd.
Facts: