SPECIAL CONTRACTS
CONTRACT OF INDEMNITY
{SEC. 124 & 125 }
CONTRCAT OF GUARANTEE
{SEC. 126 TO 147 }
CONTRACT OF BAILMENT
{SEC. 148 TO 181 }
CONTRACT OF PLEDGE
CONTRACT OF INDEMNITY
Meaning and Definition of Indemnity
Section 124 defines a contract of indemnity
as “A contract of indemnity is a contract
whereby 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.
Definition of Indemnity under Section 124 is
restrictive.
FEATURES OF INDEMNITY
It must possess all ingredients of a valid agreement.
It is a contingent agreement to make good the loss.
The loss must be caused by human conduct only.
Loss must have actually been suffered.
PARTIES TO CONTRACT OF INDEMNITY
INDEMNIFIER:
INDEMNITY HOLDER:
Examples:
Motor insurance
Marine insurance
Fire insurance
Life insurance is not the contract of indemnity
RIGHTS OF INDEMNITY-HOLDER
WHEN SUED
All Damages
All Costs
All Sums
RIGHTS OF INDEMNIFIER
The contract act is silent about the rights of
indemnifier.
Contract of Guarantee
Meaning and Definition
A contract of guarantee is defined by the
Indian Contract Act, as “A contract to
perform the promise or discharge the
liability of a third person in case of his
default.” A guarantee may be either oral
or written. [section 126].
ESSENTIALS OF CONTRACT OF GUARANTEE:
Existence of a principal debt.
Consideration for a contract of guarantee.
There should be no misrepresentation or concealment.
Contract of guarantee must contain all the essential elements of
valid contract.
Contract of guarantee is a complete and separate contract by
itself.
PARTIES TO CONTRACT OF GUARANTEE
SURETY:
PRINCIPAL DEBTOR:
CREDITOR:
TYPES OF GUARANTEE
SPECIAL GUARANTEE
A guarantee is a “specific guarantee”, if it is intended
to be applicable to a particular debt and thus comes to
an end on its repayment.
CONTINUING GUARANTEE
A guarantee which extends to a series of
transactions is called a “continuing guarantee”, e.g.,
(i) fidelity guarantee, (ii) overdraft.
RIGHTS OF SURETY
AGAINST THE PRINCIPAL DEBTOR
Right of subrogation
Right to indemnity
AGAINST THE CREDITOR
Right Of Securities
Right To Claim Set Off
AGAINST THE CO-SURETIES
When several co-sureties have given guarantee for the same debt
with their maximum limits, they are liable to pay equally but subject to
the limits they have fixed
DISCHARGE OF SURETY
Revocation by notice.
Revocation by death.
Discharge of surety by variance in terms of contract.
Discharge of surety by release or discharge of principal debtor.
Discharge of surety when creditor compounds with, gives time
to, or agrees not to sue, principal debtor.
Creditor's forbearance to sue does not discharge surety.
Release of one co-surety does not discharge other.
Discharge of surety by creditor's act or omission impairing
surety's eventual remedy.
By the creditor losing his security.
By concealment or misrepresentation.
CONTRACT OF BAILMENT
What is Bailment?
Section 148 defines Bailment as:
“The delivery of goods by one to another
person for some purpose, upon a contract that
they shall, when the purpose is accomplished,
be returned or otherwise disposed of
according to the directions of the person
delivering them.” The person delivering the
goods is called the ‘Bailor’, and the person to
whom goods are delivered is called the ‘Bailee
ESSENTIALS AND LEGAL RULES AS TO
BAILMENT:
Contract:
Delivery of Goods:
No Transfer of Ownership:
Delivery of Goods for Some Purpose:
Return of Specific Goods:
Movable Goods:
Deposit of Money Into Bank:
Kinds OF Bailment
On the basis of benefit
Bailment exclusive for Bailor’s benefit.
Bailment exclusive for Bailee’s benefit
Bailment for mutual benefit.
On the basis of willingness
Voluntary Bailment
Involuntary bailment
On the basis of Rewards
Gratituous Bailment
Non-Gratituous Bailment
Rights Of Bailor
Right of indemnity for losses due to negligence by bailee[S.152]
Termination of bailment on inconsistent use by the bailee[S.153]
Compensation for unauthorised use by the bailee[S.154]
Compensation when the bailee mixes the goods bailed with own
goods [S.155]
Right of return of goods back[S.160]
Right to profit from goods bailed[S.163]
Duties Of Bailor
To Disclose faults in goods bailed [S.150]
To repay the necessary expenses [S.158]
To indemnify the bailee [S.164]
Liability on premature breach of bailment[S.159]
Rights Of Bailee
Right to compensation for loss on account of fault in goods
bailed[S.150]
Right to receive necessary expenses[S.158]
Right against premature termination of bailment[S.159]
Right to compensation in case of defective title[S.164]
Delivery of goods to one of the joint owners[S.165]
Right against third parties
Duties Of Bailee
Take reasonable care of goods[S.151]
Not to make unauthorized use of goods[S.154]
Not to mix goods with his own goods[S.155-157]
Duty to return goods[S.160&161]
Not doing any act inconistent with terms of bailment[S.153]
Returning any profit [S.163]
CONTRACT OF PLEDGE OF PAWN
Section 172
“Pledge is the bailment of goods as security for
payment of debt or performance of a promise.”
Bailment of goods as a security for payment of
debts or performance of promise is called
pledge. The bailor is called pledgor or pawnor
and the bailee is called Pawnee.
ESSENTIALS OF PLEDGE:
Delivery of Goods:
Delivery of goods should be by way of security..
Goods must be movable.
RIGHTS AND DUTIES OF PAWNEE
Right of retainer {S.173}:
Right of particular lien
Right to extraordinary expenses {S.175}
Right in case of default of the pawnor
RIGHTS AND DUTIES OF PAWNOR
Right of redemption
Right to take back the goods.
PLEDGE BY NON OWNERS
Pledge by mercantile agent
Pledge by person in possession under
voidable contract
Pledge where pawnor has only a limited
interest
Pledge by co-owner in possession
Pledge by seller or buyer in possession after
sale
.
