Difference between indemnity and guarantee
indemnity implies protection against loss, in terms of money to be paid for
loss. Indemnity is when one party promises to compensate the loss occurred to the
other party, due to the act of the promisor or any other party.
Parties Two, i.e. indemnifier and indemnified
Number of Contracts One
Example
Indemnity
Mr. Joe is a shareholder of Alpha Ltd. lost his share certificate. Joe applies for a
duplicate one. The company agrees, but on the condition that Joe compensates for
the loss or damage to the company if a third person brings the original certificate.
the guarantee is when a person assures the other party that he/she will perform the
promise or fulfill the obligation of the third party, in case he/she default.
Parties Three, i.e. creditor, principal debtor and surety
Number of Contracts Three
Example
Guarantee
Mr. Harry takes a loan from the bank for which Mr. Joesph has given the guarantee
that if Harry default in the payment of the said amount he will discharge the liability.
Here Joseph plays the role of surety, Harry is the principal debtor and Bank is the
creditor.
