INDEMNITY AND GUARANTEE

Definition of Indemnity:

An indemnity contract is a legal arrangement between two parties in which one party agrees to pay another party for a loss or harm that meets certain requirements and conditions unless other circumstances are specified. It is a form of contingent contract which is characterized by all the essential elements of a valid contract.

In an indemnity contract, there are only two parties, as stated in:

• The indemnifier:
  The promisor, who agrees to make up the damage caused to the other group, is called the Indemnifier.
• The Indemnified:
  the person who is assured of compensation for the damage incurred (if any) is referred to as the indemnity holder or the indemnified.

The mode of the compensation contract can be express or implied, i.e. if a person expressly agrees to save the other from damages, the mode of the contract will be stated, while if the contract is signified by the terms of the case, the mode of the contract will be implied.

Definition of Guarantee:

The term guarantee is when a party assures the other party to perform the promise or undertake the obligations which needed to be fulfilled by the second party in case, he/she defaults to do the same. So, in these types of contracts there are a total of three parties involved. The person who gives such a guarantee is called the Surety. The person to whom the guarantee is given to is called the Creditor. Finally, the person on whose default such a guarantee is given is called the Principal Debtor.