1
Unit 2 –
Special Contracts
B.COM (P)-Semester 2
Faculty-
Section A- Nupur Tyagi
Department of Commerce, Gargi College
, 2
Topics to be covered
Contract of indemnity – (Section 124,125)
Definitions and essentials
Rights of indemnity holder
Time of commencement to indemnifier’s liability
Contract of guarantee - (Section 126-147)
Definitions and essentials
Distinction between indemnity and guarantee
Kings of guarantee
Nature and extent of surety’s liability
Rights of surety
Discharge of surety
Contract of bailment - (Section 148-171)
Definitions and essentials
Kinds
Rights and duties of Bailor and Bailee
Lien and its types
Contract of pledge - (Section 172-181)
Definitions and essentials
Difference with bailment
Rights and duties of pawner and Pawnee
Pledge by non-owners
Contracts of agency – (Section 182-238)
Definitions and essentials
Principal agent relationship
Creation of agency
Extent of agents authority
Delegation of authority: sub agent and substitute agent
Liability of principal
Personal liability of agent towards third party
Department of Commerce, Gargi College
, 3
CONTRACT OF INDEMNITY
Contract of indemnity meaning is a special kind of contract. The term
‘indemnity’ literally means “security or protection against a loss” or
compensation. According to Section 124 of the Indian Contract Act,
1872 “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 called a contract of indemnity.”
Example: P contracts to indemnify Q against the consequences of any
proceedings which R may take against Q in respect of a certain sum
of money.
OBJECTIVE OF CONTRACT OF INDEMNITY
The objective of entering into a contract of indemnity is to protect the
promisee against unanticipated losses.
PARTIES TO THE CONTRACT OF INDEMNITY
A contract of indemnity has two parties.
1. The promisor or indemnifier
2. The promisee or the indemnified or indemnity-holder
The promisor or indemnifier: He is the person who promises to bear
the loss.
The promisee or the indemnified or indemnity-holder: He is the
person whose loss is covered or who are compensated.
In the above-stated example,
P is the indemnifier or promisor as he promises to bear the loss of Q.
Q is the promisee or the indemnified or indemnity-holder as his loss is
covered by P.
Department of Commerce, Gargi College
, 4
ESSENTIALS OF CONTRACT OF INDEMNITY
1. PARTIES TO A CONTRACT: There must be two parties, namely,
promisor or indemnifier and the promisee or indemnified or
indemnity-holder.
2. PROTECTION OF LOSS: A contract of indemnity is entered into
for the purpose of protecting the promisee from the loss. The loss may
be caused due to the conduct of the promisor or any other person.
3. EXPRESS OR IMPLIED: The contract of indemnity may be
express (i.e. made by words spoken or written) or implied (i.e.
inferred from the conduct of the parties or circumstances of the
particular case).
4. ESSENTIALS OF A VALID CONTRACT: A contract of
indemnity is a special kind of contract. The principles of the general
law of contract contained in Section 1 to 75 of the Indian Contract
Act, 1872 are applicable to them. Therefore, it must possess all the
essentials of a valid contract.
5. NUMBER OF CONTRACTS: In a contract of Indemnity, there is
only one contract that is between the Indemnifier and the Indemnified.
RIGHTS OF PROMISEE/ THE INDEMNIFIED/ INDEMNITY
HOLDER
As per Section 125 of the Indian Contract Act, 1872 the following
rights are available to the promisee/ the indemnified/ indemnity-
holder against the promisor/ indemnifier, provided he has acted within
the scope of his authority.
1. RIGHT TO RECOVER DAMAGES PAID IN A SUIT
[SECTION 125(1)]: An indemnity-holder has the right to recover
from the indemnifier all damages which he may be compelled to pay
in any suit in respect of any matter to which the contract of indemnity
applies.
2. RIGHT TO RECOVER COSTS INCURRED IN DEFENDING A
SUIT [SECTION 125(2)]: An indemnity-holder has the right to
Department of Commerce, Gargi College
Unit 2 –
Special Contracts
B.COM (P)-Semester 2
Faculty-
Section A- Nupur Tyagi
Department of Commerce, Gargi College
, 2
Topics to be covered
Contract of indemnity – (Section 124,125)
Definitions and essentials
Rights of indemnity holder
Time of commencement to indemnifier’s liability
Contract of guarantee - (Section 126-147)
Definitions and essentials
Distinction between indemnity and guarantee
Kings of guarantee
Nature and extent of surety’s liability
Rights of surety
Discharge of surety
Contract of bailment - (Section 148-171)
Definitions and essentials
Kinds
Rights and duties of Bailor and Bailee
Lien and its types
Contract of pledge - (Section 172-181)
Definitions and essentials
Difference with bailment
Rights and duties of pawner and Pawnee
Pledge by non-owners
Contracts of agency – (Section 182-238)
Definitions and essentials
Principal agent relationship
Creation of agency
Extent of agents authority
Delegation of authority: sub agent and substitute agent
Liability of principal
Personal liability of agent towards third party
Department of Commerce, Gargi College
, 3
CONTRACT OF INDEMNITY
Contract of indemnity meaning is a special kind of contract. The term
‘indemnity’ literally means “security or protection against a loss” or
compensation. According to Section 124 of the Indian Contract Act,
1872 “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 called a contract of indemnity.”
Example: P contracts to indemnify Q against the consequences of any
proceedings which R may take against Q in respect of a certain sum
of money.
OBJECTIVE OF CONTRACT OF INDEMNITY
The objective of entering into a contract of indemnity is to protect the
promisee against unanticipated losses.
PARTIES TO THE CONTRACT OF INDEMNITY
A contract of indemnity has two parties.
1. The promisor or indemnifier
2. The promisee or the indemnified or indemnity-holder
The promisor or indemnifier: He is the person who promises to bear
the loss.
The promisee or the indemnified or indemnity-holder: He is the
person whose loss is covered or who are compensated.
In the above-stated example,
P is the indemnifier or promisor as he promises to bear the loss of Q.
Q is the promisee or the indemnified or indemnity-holder as his loss is
covered by P.
Department of Commerce, Gargi College
, 4
ESSENTIALS OF CONTRACT OF INDEMNITY
1. PARTIES TO A CONTRACT: There must be two parties, namely,
promisor or indemnifier and the promisee or indemnified or
indemnity-holder.
2. PROTECTION OF LOSS: A contract of indemnity is entered into
for the purpose of protecting the promisee from the loss. The loss may
be caused due to the conduct of the promisor or any other person.
3. EXPRESS OR IMPLIED: The contract of indemnity may be
express (i.e. made by words spoken or written) or implied (i.e.
inferred from the conduct of the parties or circumstances of the
particular case).
4. ESSENTIALS OF A VALID CONTRACT: A contract of
indemnity is a special kind of contract. The principles of the general
law of contract contained in Section 1 to 75 of the Indian Contract
Act, 1872 are applicable to them. Therefore, it must possess all the
essentials of a valid contract.
5. NUMBER OF CONTRACTS: In a contract of Indemnity, there is
only one contract that is between the Indemnifier and the Indemnified.
RIGHTS OF PROMISEE/ THE INDEMNIFIED/ INDEMNITY
HOLDER
As per Section 125 of the Indian Contract Act, 1872 the following
rights are available to the promisee/ the indemnified/ indemnity-
holder against the promisor/ indemnifier, provided he has acted within
the scope of his authority.
1. RIGHT TO RECOVER DAMAGES PAID IN A SUIT
[SECTION 125(1)]: An indemnity-holder has the right to recover
from the indemnifier all damages which he may be compelled to pay
in any suit in respect of any matter to which the contract of indemnity
applies.
2. RIGHT TO RECOVER COSTS INCURRED IN DEFENDING A
SUIT [SECTION 125(2)]: An indemnity-holder has the right to
Department of Commerce, Gargi College
