Indemnity vs Guarantee | 8 Key Differences Sec 124 & 126

Distinguish contract of indemnity and guarantee - Complete 8-mark answer under Indian Contract Act 1872. Contract of Indemnity - Sec 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. Parties: Indemnifier and Indemnified. Example: Fire insurance, marine insurance. Contract of Guarantee - Sec 126: A contract to perform the promise, or discharge the liability, of a third person in case of his default. Parties: Principal Debtor, Creditor, and Surety. Example: Bank loan guarantee, fidelity guarantee. 8 Key Differences - Indemnity vs Guarantee: Basis Indemnity - Sec 124 Guarantee - Sec 126 1. Parties 2 parties: Indemnifier & Indemnified 3 parties: Principal Debtor, Creditor, Surety 2. Number of Contracts Only 1 contract 3 contracts exist simultaneously 3. Nature of Liability Primary and independent liability Secondary and conditional liability 4. Purpose To reimburse loss To provide security to creditor 5. Interest in Transaction Indemnifier may have interest Surety has no interest except guarantee 6. Existing Debt No existing debt necessary Existing debt or promise necessary 7. Right to Sue Third Party Indemnified cannot sue third party in own name Surety can sue principal debtor after payment 8. Time of Liability Liability arises when loss occurs Liability arises only on default by principal debtor KSLU Exam Tip: Start with both definitions + sections. Use table format with 8 points for full marks. End with "Every guarantee is not indemnity but every indemnity involves guarantee element". Add 1 case law each. Key Case Laws for KSLU: Gajanan Moreshwar v Moreshwar Madan - Rights of indemnity holder under Sec 125 Bank of Bihar v Damodar Prasad - Creditor can proceed against surety without suing principal debtor Timestamps for Quick Revision: 0:00 Intro - KSLU 8-Mark Format 0:30 Sec 124: Indemnity Definition & Example 1:10 Sec 126: Guarantee Definition & Example 1:50 Difference 1-3: Parties, Contracts, Liability 3:10 Difference 4-6: Purpose, Interest, Debt 4:30 Difference 7-8: Right to Sue, Time of Liability 5:40 KSLU Case Laws 6:30 Answer Writing Format PDF notes pinned. Best for KSLU 3rd Sem BBA LLB and 5th Sem 3yr LLB Contract Law paper. #KSLULaw #KSLUExam2026 #IndemnityVsGuarantee #ContractAct1872 #Sec124 #Sec126 #KarnatakaStateLawUniversity #LLBExam #BBALLBLaw #BusinessLaw #KSLUNotes #LawExamPrep #Indemnity #Guarantee #Surety #IndianContractAct #LegalStudies #CommercialLaw #PrincipalDebtor