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CMA Intermediate · Business Laws and Ethics · Special Contracts - Indemnity and Guarantee; Bailment and Pledge; Laws of Agency

Under the Indian Contract Act, 1872, 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:

This is a contract of indemnity. Section 124 defines it as a promise to save the other party from loss caused by the promisor's own conduct or by the conduct of any other person. Guarantee differs because it concerns a third person's default.

  1. AGuarantee
  2. BIndemnityCorrect
  3. CPledge
  4. DBailment

Explanation

Section 124 defines a contract of indemnity as one where a party promises to save the other from loss caused by the promisor's own conduct or the conduct of any other person. A guarantee, by contrast, is a promise to perform or discharge the liability of a third person on his default, and it involves three parties.

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