WHAT IS THE CONTRACT OF INDEMINITY, CONTIGENT CONTRACT, N GURARENTEE, COMPARE THEIR FUTURE?

1. WHAT IS THE CONTRACT OF INDEMINITY, CONTIGENT CONTRACT, N GURARENTEE, COMPARE THEIR FUTURE?

2. 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.

3. . 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

4. . 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

5. 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

6. 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).

7. 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).

8. 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.

9. 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.

10. 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 debtor’s 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.

11. 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.

12. 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

13. . 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