By : Dr. Vilas Kulkarni.

INDEX
Contracts of Indemnity. Contracts of Gaurantee. Surety & Co Surety. Agency.

Contracts of Indemnity.
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 a " contract of indemnity". Eg - A contract to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 20000/rupees. This is a contract of indemnity.
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Essentials of Contract of Indemnity.

It must contain all the essentials of a valid contract. The promisee or the Indemnity holder must have suffered loss.

Rights of indemnity holder

1) All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies. 2) All costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit.

Continued
3) All sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.
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Contracts of Guarantee
A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default.
Eg A lends money to B and C promises A that if B fails to repay he will pay the money.
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Continued
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 . The person to whom the guarantee is given is called the "creditor. A guarantee may be either oral or written.
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Essentials of a Guarantee
1. There must be a debt existing, which should be recoverable. 2. Existence of 3 parties ie. Principal debtor, creditor & surety. 3. There should be some consideration 4. The liability must be legally enforceable.
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Continued
5. The principal debtor must be primarily liable. Suretys liability is secondary. 6. There must be a distinct promise, oral or written by the surety to pay the debt in case of default by principal debtor. 7. All essentials of a contract.
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Rights of Surety
Rights of Subrogation (Right of surety against principal debtor).When the surety pays gauranted sum to creditor on behalf of principal debtor, he owns all the rights of the Creditor. Rights to indemnity - Surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but, no sums which he has paid wrongfully

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Continued
Rights to benefit of Creditors Securities A surety is entitled to the benefit of every security which the creditor has against the principal debtor To be contributed equally in case where two or more persons are co-sureties.
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Agency
An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal".

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Creation of Agency.
Agency can be created as under: 1. Agency by agreement. 2. Agency by necessity. 3. Agency by estoppel or by holding out. 4. Agency by operation of Law. 5. Agency by ratification.
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Ratification of Agency
Ratification is adopting or accepting subsequently a past act of an agent done on behalf of another without authority. Rules governing ratification. The act must be done by one person on behalf of another.
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Continued
Ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts are done. No valid ratification can be made by a person whose knowledge of the facts of the case is materially defective.
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Continued
Ratification must be communicated. Ratification can be for whole contract and not part of it. Ratification should not put a third party to damages. Ratification must be done within reasonable time.
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Classification of Agents.
Specific or particular agent. General agent. Mercantile agent. Sub-Agent. Co-Agent. Substitute Agent.

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Agent's authority
The authority of an agent may be expressed or implied. An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such act. An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
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Revocation of Agents Authority.

The principal may revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal. Revocation of authority terminates the agents authority.

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Continued...
The principal cannot revoke the authority in following cases When agent has partly exercised the authority. Where agency is coupled with interest. When agent is personally liable.
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Termination of agency
An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.

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Agent's duty to principal

An agent is bound to conduct the business of his principal according to the directions given by the principal An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business
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Continued
To render proper accounts. To pay sums to principal received for him. To communicate with principal. Not to make secret profits from agency.

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Rights of Agent.
To retain out of any sums received on account of the principal, all moneys due to himself. To lien. To indemnity. To receive compensation in respect of injury caused to him by the principal's neglect or want of skill. To appoint substitute agent.
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Principals Rights.
To repudiate Contract. To demand accounts. To refuse renumeration to agent who is guilty of misconduct. To claim loss of profit sustained by him. To revoke agents authority.
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THANK YOU !!!

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