Special Contracts

Indemnity and Guarantee

Bailment and Pledge
Law of Agency
- Arun Kumar Davay

Contract of Indemnity and

Guarantee

Indemnity (S.124) 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 an Indemnity.
Guarantee (S.126): A Contract to perform
the promise or discharge the liability of a
third person, in case of his default.
One who gives the Guarantee Surety
To the one for whom the guarantee is

If you lend Rs. To C, Ill see that your

money comes back (Indemnity) 2
Parties
If you lend Rs. To C, and if C does not
repay you, I will (Guarantee) 3 Parties.
The liability of a Surety is co-exhaustive
with that of Principal Debtor ie., Surety is
liable for Principal Amount and Interest.
Creditor may sue Surety without suing
Principal Debtor.

Rights of A Surety
Against Principal Debtor:
Right of Subrogation (S.140). Surety
has all the rights of the Creditor once
the debt is settled.
2. Right to be indemnified (S.141). Right
to be repaid with interest from P.D
Against Co-Sureties:
Right of Contribution(S.146). When one
Surety has paid more than his Share
Against the Creditor:
Right to claim Securities
2. Right to Set Off (Adjustment of Other
Loans)

Discharge of Surety
1.By notice of Revocation(S.130)
2.By Death of Surety (S.131)
3.By variance in terms of Contract
(S.133)
4.By release of Discharge of P.D (S.134)
5.By compounding with, or giving time to
or agreeing not to sue P.D (S.135)
6.By creditors act of omission impairing
suretys eventual remedy (S.139)
7.Loss of Security (S.141)

Contract of Bailment
andofPledge
Bailment S.148: Delivery
goods by
one to another person for some
purpose upon a contract that they shall
be returned.
Person Delivering Bailor
To whom the goods are delivered Bailee
Characteristics:
1.Delivery of the Goods
2.Contract
3.Return of goods in specie (specific)

Duties of the Bailee

1.To take care of the goods
2.Not to make unauthorised use of goods
3.Not to mix bailors goods with his own
4.To return the goods bailed
5.To return any accretion to the goods
bailed.
Rights of a Bailee:
1.Can sue Bailor for non disclosure of
faults
2.Lien on the Goods.

Duties of the Bailor S-150

1.To disclose faults in the goods
2.Liability for breach of warranty asto
Title
3.To bear expenses in case of
gratuitous bailment (horse for hire
Food to be given, but medical
expenses to be refunded)
Pledge: S-172: The bailment of goods
as a Security for payment of a debt
or performance of a promise in

Differences between
Bailment
Pledge
1.
Pledge is aand
kind of
bailment as a
security for payment. Bailment is a
broader expression
2. In the event of default, Pledge
Pledgee has the right to sell the
goods. Bailee cannot sell the goods
but only has a lien
3. Pldgee can further pledge the
goods. Bailee doesn't have such a
right

Contract of Agency
(Sec182): An Agent is a person employed
to do any act for another or to represent
another in dealings with the third person.
Essentials of Agency:
1.Basis of the Agreement
2.Consideration not necessary
3.Capacity to employ an Agent
4.Capacity to be employed as an Agent

Modes by which an Agency is

created
1.Express Agency
- S.187
2.Implied Agency S.187
3.Agency By Estoppel S.237
4.Agency By Holding Out S.188
5.Agency of Necessity S.189
6.Agency by Ratification S.196

Duties of an Agent Sec.211

1.To conduct the business of Agency
according to the Principals directions
2.Duty to act with reasonable care and
skill
3.To render Proper Accounts
4.In case of difficulty, to communicate
with the Principal
5.Not to deal on his own account
6.Not to make any secret profits
7.Not to disclose confidential information

Duties of an Agent Sec.211

8.Not to use information obtained in the
course of Agency against the Principal
9.Not to set up adverse Title
10.Duty to exercise his authority
personally

Termination of Agency
I. By Act of Parties:
1.By Agreement
2.By Revocation by the Principal
II. By Operation of Law:
1.Completion of Business
2.Expiry of Time
3.Death of Principal or Agent
4.Insanity of the Principal or Agent
5.Insolvency of the Principal
6.Destruction of the Subject Matter
7.Dissolution of a Company
8.Termination of Sub Agents Authority

Classification of Agents
1.Broker
2.Factor
3.Commission Agent
4.Del Credre Agent (For Foreign
Contracts)
5.Autioneer
6.Banker
7.Indentor
8.Wife as an Agent
9.Sub Agent and Substituted Agent