Definition :

Contract of Indemnity defined under Section 124 of Indian Contract Act as, A contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”.


A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”, the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.



A Contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity.


B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is a sufficient consideration for C’s promise.


In contract of Indemnity there are two parties

In guarantee there are three parties


One Contract: Contract between indemnifier and indemnified.
Three Contracts:
1) contract between Surety and Creditor
2) contract between Principle debtor and Surety
3) contract between Creditor  and Principle debtor    


The liability arises on the happening of a contingency.

The liability arises, if there is default by Principle debtor.


The object of Contract of Indemnity is to reimburse the loss.

The object is to provide security to creditor.


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