Difference between contract of indemnity and contract of guarantee has been discussed in this article. And, before that let’s see what is the contract of indemnity and guarantee means?

difference between contract of indemnity and contract of guarantee
Difference Between Contract of Indemnity and Contract of Guarantee

Contract of indemnity and guarantee are the types of contingent contracts which are governed by the Indian Contract Act, 1872.

Difference Between Contract of Indemnity and Contract of Guarantee

Contract of IndemnityContract of Guarantee
In the contract of indemnity, the word indemnity means “security against loss”.In the contract of guarantee, the word guarantee means “an individual person assures the opposite party that he or she will fulfil the obligation in case of a default in the contract”.
The contract of indemnity is defined under section 124 of the Indian Contract Act, 1872.Whereas, the contract of guarantee has been defined under section 126 of the Indian Contract Act, 1872.
In the contract of indemnity, there are two contracting parties namely the indemnifier and indemnity holder.In the contract of guarantee, there are three contracting parties namely the principal debtor, creditor and surety.
In the contract of indemnity, there is only one contract formed between the indemnifier and indemnity holder.But, in the contract of guarantee, there are three contracts are formed; 1) between principal debtor and creditor, 2) between the principal debtor and surety, and 3) between creditor and surety.
The main purpose of the contract of indemnity is to compensate for the loss.The main object of the contract of guarantee is to give assurance to the promissee.
The primary liability arises in the indemnity contract.Secondary liability arises in the guarantee.

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