SPECIAL CONTRACTSSPECIAL 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 CONTRACT OF INDEMNITY 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 INDEMNITYPARTIES TO CONTRACT OF INDEMNITYINDEMNIFIER:INDEMNITY HOLDER:

Examples:Motor insuranceMarine insuranceFire insurance

Life insurance is not the contract of indemnity

RIGHTS OF INDEMNITY-HOLDER RIGHTS OF INDEMNITY-HOLDER WHEN SUEDWHEN SUED

All Damages All Costs All Sums

RIGHTS OF INDEMNIFIERRIGHTS OF INDEMNIFIER

The contract act is silent about the rights of indemnifier.

Contract of GuaranteeContract of Guarantee

Meaning and DefinitionA 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: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 GUARANTEEPARTIES TO CONTRACT OF GUARANTEE

SURETY:

PRINCIPAL DEBTOR:

CREDITOR:

TYPES OF GUARANTEETYPES 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 SURETYRIGHTS 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 SURETYDISCHARGE 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 CONTRACT OF BAILMENTBAILMENT 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 ESSENTIALS AND LEGAL RULES AS TO BAILMENT: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 BailmentKinds 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 Rights Of Bailor

Duties Of BailorDuties 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]

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 BaileeRights Of BaileeRight 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 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 PAWNCONTRACT 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: ESSENTIALS OF PLEDGE:    Delivery of Goods: Delivery of goods should be by way of security.. Goods must be movable.

RIGHTS AND DUTIES OF PAWNEERIGHTS AND DUTIES OF PAWNEE

Right of retainer {S.173}: Right of particular lienRight to extraordinary expenses {S.175}Right in case of default of the pawnor

RIGHTS AND DUTIES OF PAWNORRIGHTS AND DUTIES OF PAWNOR

Right of redemptionRight to take back the goods.

PLEDGE BY NON OWNERSPLEDGE 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.