Contract of Indemnity
A contract of indemnity is defined as a special contract by virtue of which two parties’ enter into a contract, if and only if, one party promises the other party to save it from any losses incurred due to the contract or any other specific reasons. The party which makes the promise is termed as indemnifier. The party which is protected by the promise is termed as indemnified. The best possible example of a contract of indemnity would be the contract of insurance.
Contract of Guarantee
A contract of guarantee may be defined as a contract to carry out the promise of a third person in case of any defaults. The person who gives the guarantee is termed as surety.
● ‘Debtor’ is the term used for the person for whom the guarantee is given.
● The person to whom the guarantee would be given is called creditor.
● A guarantee can either be oral or written.
● A contract must qualify all the norms of a valid contract just like an indemnity.
● There is however a special consideration according to section 127 of the Contract Act, i.e., it may be a sufficient condition for the surety to give the guarantee that something is done or some promises are made for the benefit of the principal debtor.