Posted February 1, 2014 by advocateguru in Learning Centre

Distinction between Indemnity and Guarantee

There are some of the distinctions between Indemnity and Guarantee. Although they have similarities like they both should support the essentials of a contract. A contract of indemnity differs from a contract of guarantee in the following ways:

  • In a contract of indemnity, there are only 2 parties i.e. Indemnifier and Indemnity Holder. In a contract of Guarantee, there are only 3 parties i.e. Surety or Guarantor, Principal Debtor and Creditor.
  • The indemnifier need not necessarily act at the request of the debtor; the surety gives guarantee only’ at the request of the principal debtor.
  • In the case of a guarantee there is an existing debt or duty, the performance of which is guaranteed by the surety, whereas in the case of indemnity the possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify.
  • The surety, on payment of the debt when the principal debtor has failed to pay is entitled to proceed against the principal debtor in his own right, but the indemnifier cannot sue third-parties in his own name, unless there be assignment. He must sue in the name of the indemnified.
  • In a contract of indemnity, the liability of the indemnifier is primary. In a contract of guarantee, the liability of the surety is secondary. The surety is liable only if the principal debtor makes a default, the primary liability being that of the principal debtor.