MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO INDEMNITY AND GUARANTEE
What is the primary difference between indemnity and guarantee?
A. Indemnity involves a promise to perform the duty, while guarantee involves compensation in case of loss.
B. Indemnity involves compensation for loss, while guarantee involves a promise to perform the duty.
C. Both terms are interchangeable and mean the same thing.
D. Indemnity and guarantee are legal terms but have no specific differences.
Answer: B. Indemnity involves compensation for loss, while guarantee involves a promise to perform the duty.
In an indemnity contract:
A. Only one party makes a promise to compensate for any loss.
B. Both parties make promises to compensate for any loss.
C. No promises are made; it’s solely based on trust.
D. The terms are not legally binding.
Answer: A. Only one party makes a promise to compensate for any loss.
A contract of guarantee:
A. Requires three parties: the creditor, the principal debtor, and the surety.
B. Involves two parties only—the creditor and the debtor.
C. Involves multiple parties with no specific limit.
D. Is void if not made in writing.
Answer: A. Requires three parties: the creditor, the principal debtor, and the surety.
Which statement about indemnity is correct?
A. Indemnity contracts only cover monetary losses.
B. Indemnity can cover both monetary and non-monetary losses.
C. Indemnity contracts are always implied, never expressed.
D. Indemnity is exclusively applicable in insurance contracts.
Answer: B. Indemnity can cover both monetary and non-monetary losses.
A contract of guarantee can be discharged by:
A. Death of the surety.
B. Alteration in the terms of the contract.
C. Inadequate consideration.
D. Change in the law.
Answer: A. Death of the surety.
In a contract of indemnity, the indemnifier has the right to:
A. Recover the damages only after providing proof of loss.
B. Recover the damages without necessarily providing proof of loss.
C. Recover the damages from any third party, irrespective of fault.
D. Recover the damages only if the indemnity contract is notarized.
Answer: A. Recover the damages only after providing proof of loss.
Which statement about guarantee is accurate?
A. A guarantee cannot exist without an underlying contract.
B. A guarantee is always a standalone contract.
C. A guarantee is always implied and not expressed.
D. A guarantee doesn’t require parties; it’s solely based on legal provisions.
Answer: A. A guarantee cannot exist without an underlying contract.
In a contract of guarantee, the liability of the guarantor:
A. Extends only to the extent of the principal debtor’s liability.
B. Is always unlimited.
C. Depends on the goodwill of the creditor.
D. Is separate and unrelated to the principal debtor’s liability.
Answer: A. Extends only to the extent of the principal debtor’s liability.
Indemnity is primarily governed by:
A. Common law.
B. Statutory law.
C. International law.
D. Customary law.
Answer: A. Common law.
Which of the following is NOT a type of guarantee?
A. Specific Guarantee
B. Continuing Guarantee
C. Unilateral Guarantee
D. Absolute Guarantee
Answer: C. Unilateral Guarantee
In a contract of indemnity, the indemnifier can refuse to indemnify if:
A. The loss was caused by an act beyond the control of the indemnity holder.
B. The indemnity holder failed to mitigate the loss.
C. The indemnity holder is a minor.
D. The loss occurred due to the natural course of events.
Answer: B. The indemnity holder failed to mitigate the loss.
An example of a contract of guarantee is:
A. A warranty on an electronic device.
B. A promise by a friend to pay back a loan if the borrower defaults.
C. An insurance policy against fire damage.
D. A contract to buy goods.
Answer: B. A promise by a friend to pay back a loan if the borrower defaults.
The discharge of a contract of guarantee by operation of law can occur through:
A. Agreement between the principal debtor and creditor.
B. Revocation by the surety.
C. Amending the terms of the principal contract.
D. Death or insanity of the principal debtor.
Answer: D. Death or insanity of the principal debtor.
Indemnity contracts are commonly used in:
A. Business transactions and insurance.
B. Criminal proceedings.
C. Personal relationships.
D. Public services.
Answer: A. Business transactions and insurance.
In a contract of guarantee, the surety’s liability:
A. Is greater than that of the principal debtor.
B. Is always less than that of the principal debtor.
C. Is equal to that of the principal debtor.
D. Depends on the duration of the guarantee.
Answer: C. Is equal to that of the principal debtor.
Feel free to ask if you’d like more questions or any specific information on this topic!
User
MORE MORE 50
ChatGPT
Certainly! Here are more multiple-choice questions on indemnity and guarantee:
Which of the following is true regarding the discharge of a contract of indemnity?
A. It can only be discharged by mutual consent.
B. It is discharged automatically after a certain period.
C. The discharge methods are similar to those of a contract of guarantee.
D. The discharge methods vary based on the nature of the indemnity contract.
Answer: D. The discharge methods vary based on the nature of the indemnity contract.
The difference between a contract of indemnity and a contract of insurance is:
A. Contracts of indemnity are always in writing, while contracts of insurance can be oral.
B. Contracts of indemnity involve parties’ compensation, while contracts of insurance transfer risk.
C. Contracts of indemnity involve a single party, while contracts of insurance involve multiple parties.
D. Contracts of indemnity are legally binding, while contracts of insurance are not.
Answer: B. Contracts of indemnity involve parties’ compensation, while contracts of insurance transfer risk.
The surety’s liability in a contract of guarantee:
A. Depends on the financial stability of the principal debtor.
B. Is fixed and can be reduced through negotiations with the creditor.
C. Is limited to the amount specified in the guarantee.
D. Is always unlimited.
Answer: C. Is limited to the amount specified in the guarantee.
Which event could discharge a contract of guarantee?
A. The surety’s insolvency.
B. Mutual agreement between the creditor and principal debtor.
C. Change in the economic conditions.
D. The surety’s relocation to a different country.
Answer: B. Mutual agreement between the creditor and principal debtor.
An example of indemnity is:
A. A security deposit for renting an apartment.
B. A gift given out of goodwill.
C. An advance payment for services to be rendered.
D. A warranty on a product.
Answer: A. A security deposit for renting an apartment.
The discharge of a contract of indemnity by novation occurs when:
A. The indemnifier transfers their rights to a third party.
B. The indemnity holder agrees to accept a different person as the indemnifier.
C. The terms of the indemnity contract are altered with mutual consent.
D. The indemnifier fails to prove the occurrence of loss.
Answer: C. The terms of the indemnity contract are altered with mutual consent.
In a contract of guarantee, the liability of the surety:
A. Ceases upon the death of the principal debtor.
B. Continues even if the principal debtor’s liability is discharged.
C. Depends on the age of the principal debtor.
D. Is nullified if the principal debtor declares bankruptcy.
Answer: B. Continues even if the principal debtor’s liability is discharged.
Indemnity contracts are commonly found in which industry?
A. Real estate.
B. Entertainment.
C. Construction.
D. Healthcare.
Answer: C. Construction.
A continuing guarantee:
A. Can be revoked by the surety at any time.
B. Requires the consent of the principal debtor to be effective.
C. Extends to a series of transactions and continues until revoked.
D. Is applicable for a single, specific transaction only.
Answer: C. Extends to a series of transactions and continues until revoked.
The surety’s liability in a contract of guarantee is:
A. Conditional on the performance of the principal debtor.
B. Nullified if the principal debtor fails to perform.
C. Independent of the principal debtor’s performance.
D. Limited to half of the principal debtor’s liability.
Answer: C. Independent of the principal debtor’s performance.
Which circumstance would discharge a contract of guarantee by operation of law?
A. Change in the guarantee’s period.
B. Alteration in the terms of the principal contract.
C. Transfer of the creditor’s rights to another party.
D. Insanity of the creditor.
Answer: D. Insanity of the creditor.
Indemnity contracts aim to:
A. Transfer risk from one party to another.
B. Ensure the performance of a contractual obligation.
C. Guarantee the financial stability of a business.
D. Protect against unforeseen liabilities or losses.
Answer: D. Protect against unforeseen liabilities or losses.
A contract of guarantee is terminated by:
A. A change in the financial status of the surety.
B. The insolvency of the principal debtor.
C. Mutual consent of all parties involved.
D. The surety’s relocation to another state.
Answer: C. Mutual consent of all parties involved.
In an indemnity contract, the indemnifier’s duty arises:
A. Only after the occurrence of loss or damage.
B. Immediately upon signing the contract.
C. When the indemnity holder requests compensation.
D. When a court order is issued.
Answer: A. Only after the occurrence of loss or damage.
The discharge of a contract of guarantee by novation occurs when:
A. The surety’s financial status deteriorates.
B. A new contract is substituted for the original guarantee.
C. The principal debtor transfers the debt to a third party.
D. The creditor changes the terms of the guarantee without consent.
Answer: B. A new contract is substituted for the original guarantee.
Indemnity contracts are commonly used in:
A. Personal loans among friends.
B. Government contracts.
C. Buying and selling goods.
D. Marriage contracts.
Answer: B. Government contracts.
Which situation could discharge a contract of guarantee by release?
A. Alteration in the terms of the principal contract.
B. Relocation of the surety to a different country.
C. The principal debtor’s bankruptcy.
D. The creditor’s death.
Answer: C. The principal debtor’s bankruptcy.
An example of a contract of guarantee is:
A. A manufacturer’s warranty on a product.
B. A bank guarantee for a loan.
C. A rental security deposit.
D. A sales contract.
Answer: B. A bank guarantee for a loan.
In a contract of indemnity, the indemnifier’s liability:
A. Is limited to the value of the loss suffered.
B. Is nullified if the indemnity holder is partially at fault.
C. Ceases if the indemnity holder fails to notify the indemnifier.
D. Continues regardless of the indemnity holder’s actions.
Answer: A. Is limited to the value of the loss suffered.
The discharge of a contract of guarantee by alteration occurs when:
A. The principal debtor’s obligation changes without the surety’s consent.
B. The surety relocates to a different state.
C. The creditor transfers the debt to another party.
D. The guarantee period expires.
Answer: A. The principal debtor’s obligation changes without the surety’s consent.
Indemnity is often used in:
A. Retail transactions.
B. Legal agreements.
C. Hospitality services.
D. Agricultural contracts.
Answer: B. Legal agreements.
The liability of the guarantor in a contract of guarantee:
A. Is secondary to that of the principal debtor.
B. Is always unlimited.
C. Is equal to the value of the principal debtor’s liability.
D. Depends on the credibility of the creditor.
Answer: A. Is secondary to that of the principal debtor.
Which event could discharge a contract of indemnity by novation?
A. The indemnity holder’s relocation.
B. Alteration in the terms of the indemnity contract with mutual consent.
C. The indemnifier’s death.
D. The indemnity holder’s failure to mitigate loss.
Answer: B. Alteration in the terms of the indemnity contract with mutual consent.
In a contract of guarantee, the surety’s liability:
A. Is void if the principal debtor breaches the contract.
B. Extends beyond the principal debtor’s liability.
C. Depends on the surety’s financial status only.
D. Ceases if the principal debtor is a minor.
Answer: B. Extends beyond the principal debtor’s liability.
Indemnity contracts are widely used in the field of:
A. Education.
B. Sports.
C. Manufacturing.
D. Transportation.
Answer: C. Manufacturing.
The discharge of a contract of guarantee by release occurs when:
A. The principal debtor pays off the debt.
B. The creditor assigns the debt to another party.
C. The surety’s financial status deteriorates.
D. The guarantee period expires.
Answer: A. The principal debtor pays off the debt.
Which situation could discharge a contract of indemnity by release?
A. The indemnifier’s insolvency.
B. The indemnity holder’s relocation.
C. Alteration in the terms of the indemnity contract without consent.
D. The occurrence of loss or damage.
Answer: D. The occurrence of loss or damage.
An example of a contract of indemnity is:
A. A health insurance policy.
B. A sales contract for goods.
C. A lease agreement for a property.
D. A promise to reimburse for any loss suffered.
Answer: D. A promise to reimburse for any loss suffered.
In a contract of guarantee, the surety’s liability:
A. Is determined by the principal debtor’s actions.
B. Is void if the creditor fails to notify the surety.
C. Extends only if the principal debtor defaults.
D. Depends on the surety’s nationality.
Answer: C. Extends only if the principal debtor defaults.
Indemnity contracts are often utilized in:
A. Entertainment industry contracts.
B. Environmental agreements.
C. Construction project contracts.
D. Charity donations.
Answer: C. Construction project contracts.
The discharge of a contract of guarantee by operation of law can occur through:
A. Alteration in the terms of the guarantee.
B. The surety’s relocation.
C. The principal debtor’s insolvency.
D. Mutual consent between the parties.
Answer: C. The principal debtor’s insolvency.
Which event could discharge a contract of indemnity by release?
A. Change in the economic conditions.
B. The indemnifier’s relocation.
C. The indemnity holder’s breach of the contract.
D. Alteration in the terms of the indemnity contract with mutual consent.
Answer: D. Alteration in the terms of the indemnity contract with mutual consent.
A contract of guarantee involves:
A. A promise to compensate for any loss or damage suffered.
B. A transfer of risk from one party to another.
C. A contractual obligation to perform a duty.
D. A unilateral promise by the creditor.
Answer: A. A promise to compensate for any loss or damage suffered.
The liability of the guarantor in a contract of guarantee:
A. Is equivalent to the principal debtor’s liability.
B. Depends on the creditor’s discretion.
C. Is discharged upon the principal debtor’s death.
D. Can be reduced by the principal debtor’s actions.
Answer: A. Is equivalent to the principal debtor’s liability.
Indemnity contracts are commonly used in which sector?
A. Information technology.
B. Retail sales.
C. Financial services.
D. Non-profit organizations.
Answer: C. Financial services.
In a contract of guarantee, the surety’s liability:
A. Is contingent upon the principal debtor’s consent.
B. Depends on the value of the creditor’s claim.
C. Is coextensive with the principal debtor’s liability.
D. Is limited to half of the principal debtor’s liability.
Answer: C. Is coextensive with the principal debtor’s liability.
Indemnity contracts are often utilized in which type of agreements?
A. Employment contracts.
B. Rental agreements.
C. Import-export contracts.
D. Franchise agreements.
Answer: C. Import-export contracts.
The discharge of a contract of guarantee by alteration occurs when:
A. The surety agrees to amend the guarantee terms.
B. The principal debtor’s obligations change without the surety’s consent.
C. The guarantee period expires.
D. The creditor relocates to a different country.
Answer: B. The principal debtor’s obligations change without the surety’s consent.
An example of a contract of indemnity is:
A. A bank guarantee for a loan.
B. A security deposit for a rented apartment.
C. An employment contract.
D. A purchase order for goods.
Answer: B. A security deposit for a rented apartment.
The discharge of a contract of guarantee by release occurs when:
A. The principal debtor defaults on the payment.
B. The creditor assigns the debt to another party.
C. The surety’s financial status improves.
D. The guarantee period is extended.
Answer: A. The principal debtor defaults on the payment.
Indemnity contracts are frequently used in:
A. Online transactions.
B. Import-export businesses.
C. Social contracts.
D. Freelancing agreements.
Answer: B. Import-export businesses.
Which situation could discharge a contract of guarantee by novation?
A. The surety’s insolvency.
B. Alteration in the terms of the principal contract with mutual consent.
C. The principal debtor’s relocation.
D. The creditor’s refusal to accept payment.
Answer: B. Alteration in the terms of the principal contract with mutual consent.
In a contract of guarantee, the surety’s liability:
A. Is limited to the creditor’s discretion.
B. Extends only if the principal debtor defaults.
C. Ceases upon the creditor’s request.
D. Depends on the surety’s financial status.
Answer: B. Extends only if the principal debtor defaults.
Indemnity contracts are commonly used in which sector?
A. Real estate.
B. Fashion industry.
C. Agriculture.
D. Technology startups.
Answer: A. Real estate.
The discharge of a contract of guarantee by operation of law can occur through:
A. The surety’s relocation.
B. The principal debtor’s death.
C. Alteration in the terms of the guarantee.
D. Mutual agreement between the surety and principal debtor.
Answer: B. The principal debtor’s death.
An example of a contract of guarantee is:
A. A warranty for a product.
B. An insurance policy against theft.
C. A bank guarantee for a loan.
D. A lease agreement for a property.
Answer: C. A bank guarantee for a loan.
In a contract of indemnity, the indemnifier’s liability:
A. Is dependent on the indemnity holder’s financial status.
B. Ceases upon the occurrence of loss or damage.
C. Extends to any loss or damage suffered by the indemnity holder.
D. Is limited to half of the indemnity holder’s loss.
Answer: C. Extends to any loss or damage suffered by the indemnity holder.
Indemnity contracts are often used in:
A. Educational institutions.
B. Government contracts.
C. Retail businesses.
D. Personal loans.
Answer: B. Government contracts.
The discharge of a contract of guarantee by release occurs when:
A. The surety’s financial status deteriorates.
B. The principal debtor relocates to another country.
C. The creditor assigns the debt to another party.
D. The principal debtor pays off the debt.
Answer: D. The principal debtor pays off the debt.
Which event could discharge a contract of indemnity by release?
A. Change in economic conditions.
B. The indemnifier’s insolvency.
C. The occurrence of loss or damage.
D. Alteration in the terms of the indemnity contract with mutual consent.
Answer: D. Alteration in the terms of the indemnity contract with mutual consent.
A contract of guarantee involves:
A. A transfer of risk from the creditor to the principal debtor.
B. A unilateral promise by the debtor.
C. A promise to indemnify for any loss suffered.
D. A contractual obligation to perform a duty.
Answer: C. A promise to indemnify for any loss suffered.
The liability of the guarantor in a contract of guarantee:
A. Is always limited to half of the principal debtor’s liability.
B. Is discharged upon the principal debtor’s death.
C. Depends on the principal debtor’s financial status.
D. Is equivalent to the principal debtor’s liability.
Answer: D. Is equivalent to the principal debtor’s liability.
Indemnity contracts are commonly used in which type of transactions?
A. Barter trade.
B. Cross-border trade.
C. Intra-city transactions.
D. Retail transactions.
Answer: B. Cross-border trade.
The discharge of a contract of guarantee by alteration occurs when:
A. The surety’s financial status changes.
B. The guarantee period expires.
C. The terms of the principal contract change without the surety’s consent.
D. The creditor’s relocation.
Answer: C. The terms of the principal contract change without the surety’s consent.
An example of a contract of indemnity is:
A. An insurance policy against accidents.
B. A lease agreement for a property.
C. A sales contract for goods.
D. A promise to compensate for any loss suffered.
Answer: D. A promise to compensate for any loss suffered.
The discharge of a contract of guarantee by release occurs when:
A. The principal debtor defaults on the payment.
B. The creditor relocates to another country.
C. The surety’s financial status improves.
D. The guarantee period expires.
Answer: A. The principal debtor defaults on the payment.
In a contract of guarantee, the surety’s liability:
A. Depends on the creditor’s discretion.
B. Ceases upon the principal debtor’s relocation.
C. Is secondary to the principal debtor’s liability.
D. Depends on the surety’s nationality.
Answer: C. Is secondary to the principal debtor’s liability.
Indemnity contracts are frequently used in which sector?
A. Technology startups.
B. Healthcare services.
C. Entertainment industry.
D. Hospitality businesses.
Answer: B. Healthcare services.
The discharge of a contract of guarantee by operation of law can occur through:
A. The surety’s insolvency.
B. Alteration in the terms of the guarantee.
C. Mutual agreement between the surety and principal debtor.
D. The principal debtor’s death.
Answer: D. The principal debtor’s death.
Which situation could discharge a contract of indemnity by novation?
A. Alteration in the terms of the indemnity contract with mutual consent.
B. The indemnifier’s relocation.
C. The occurrence of loss or damage.
D. The indemnity holder’s breach of the contract.
Answer: A. Alteration in the terms of the indemnity contract with mutual consent.
An example of a contract of guarantee is:
A. A security deposit for a rented apartment.
B. A manufacturer’s warranty on a product.
C. A lease agreement for machinery.
D. A loan agreement between friends.
Answer: D. A loan agreement between friends.
In a contract of indemnity, the indemnifier’s liability:
A. Is nullified if the indemnity holder contributes to the loss.
B. Ceases upon the indemnity holder’s death.
C. Is determined by the indemnity holder’s financial status.
D. Is limited to the indemnity holder’s negligence.
Answer: A. Is nullified if the indemnity holder contributes to the loss.
Indemnity contracts are commonly used in which sector?
A. Agriculture.
B. Automotive industry.
C. Shipping and logistics.
D. Non-profit organizations.
Answer: C. Shipping and logistics.
The discharge of a contract of guarantee by operation of law can occur through:
A. Mutual consent between the surety and principal debtor.
B. Alteration in the terms of the guarantee.
C. The principal debtor’s bankruptcy.
D. The creditor’s relocation.
Answer: C. The principal debtor’s bankruptcy.
In a contract of guarantee, the surety’s liability:
A. Ceases upon the creditor’s request.
B. Is equivalent to half of the principal debtor’s liability.
C. Is discharged upon the principal debtor’s relocation.
D. Depends on the surety’s financial status.
Answer: D. Depends on the surety’s financial status.
Indemnity contracts are frequently used in which type of agreements?
A. Commercial lease agreements.
B. Service contracts between individuals.
C. Insurance policies.
D. Employment contracts.
Answer: A. Commercial lease agreements.
The discharge of a contract of guarantee by release occurs when:
A. The surety’s financial status improves.
B. The principal debtor defaults on the payment.
C. The guarantee period expires.
D. The creditor relocates to another country.
Answer: B. The principal debtor defaults on the payment.
Which event could discharge a contract of indemnity by novation?
A. The indemnifier’s insolvency.
B. Alteration in the terms of the indemnity contract with mutual consent.
C. The occurrence of loss or damage.
D. The indemnity holder’s relocation.
Answer: B. Alteration in the terms of the indemnity contract with mutual consent.
An example of a contract of indemnity is:
A. An insurance policy against fire damage.
B. A lease agreement for a property.
C. A sales contract for goods.
D. A promise to reimburse for any loss suffered.
Answer: D. A promise to reimburse for any loss suffered.
The discharge of a contract of guarantee by release occurs when:
A. The principal debtor pays off the debt.
B. The creditor assigns the debt to another party.
C. The surety’s financial status deteriorates.
D. The guarantee period expires.
Answer: A. The principal debtor pays off the debt.
In a contract of guarantee, the surety’s liability:
A. Is void if the principal debtor breaches the contract.
B. Extends beyond the principal debtor’s liability.
C. Depends on the principal debtor’s financial status.
D. Ceases if the principal debtor is a minor.
Answer: B. Extends beyond the principal debtor’s liability.
Indemnity contracts are commonly used in which sector?
A. Retail businesses.
B. Legal services.
C. Construction industry.
D. Non-governmental organizations (NGOs).
Answer: C. Construction industry.
The discharge of a contract of guarantee by operation of law can occur through:
A. Alteration in the terms of the guarantee.
B. Mutual agreement between the surety and principal debtor.
C. The principal debtor’s death.
D. The surety’s relocation.
Answer: C. The principal debtor’s death.
In a contract of indemnity, the indemnifier’s liability:
A. Ceases upon the occurrence of loss or damage.
B. Is limited to half of the indemnity holder’s loss.
C. Is dependent on the indemnity holder’s financial status.
D. Extends to any loss or damage suffered by the indemnity holder.
Answer: D. Extends to any loss or damage suffered by the indemnity holder.
Indemnity contracts are frequently used in which sector?
A. Information technology.
B. Healthcare services.
C. Hospitality industry.
D. Educational institutions.
Answer: A. Information technology.
The discharge of a contract of guarantee by release occurs when:
A. The principal debtor defaults on the payment.
B. The creditor relocates to another country.
C. The surety’s financial status improves.
D. The guarantee period is extended.
Answer: A. The principal debtor defaults on the payment.
Which situation could discharge a contract of indemnity by novation?
A. Alteration in the terms of the indemnity contract with mutual consent.
B. The indemnifier’s relocation.
C. The occurrence of loss or damage.
D. The indemnity holder’s breach of the contract.
Answer: A. Alteration in the terms of the indemnity contract with mutual consent.
An example of a contract of guarantee is:
A. A security deposit for a rented apartment.
B. A manufacturer’s warranty on a product.
C. A lease agreement for machinery.
D. A loan agreement between friends.
Answer: D. A loan agreement between friends.
In a contract of indemnity, the indemnifier’s liability:
A. Is nullified if the indemnity holder contributes to the loss.
B. Ceases upon the indemnity holder’s death.
C. Is determined by the indemnity holder’s financial status.
D. Is limited to the indemnity holder’s negligence.
Answer: A. Is nullified if the indemnity holder contributes to the loss.
Indemnity contracts are commonly used in which sector?
A. Agriculture.
B. Automotive industry.
C. Shipping and logistics.
D. Non-profit organizations.
Answer: C. Shipping and logistics.
