Question

Which of the following refers to a contract by which one party promises to save the other from loss caused by him by the conduct of the Promisor himself, or by the conduct of any other person?

• A. Contract of guarantee
• B. Contract of surety
• C. Contract of indemnity
• D. Contract of liability

Answer 1

The correct option is C Contract of indemnity

The term Indemnity literally means “Security against loss". In a contract of indemnity one party – i.e. the indemnifier promise to compensate the other party i.e. the indemnified against the loss suffered by the other.

The definition of a contract of indemnity as laid down in Section 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 a contract of indemnity.

Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person.