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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

Which feature distinguishes a pledge from a contract of indemnity as defined in the Act?

A pledge is a bailment of goods as security for payment of a debt or performance of a promise, while indemnity is a promise to save the other party from loss caused by the promisor or by another person. The two have different essentials.

  1. AA pledge is a bailment of goods as security, whereas indemnity is a promise to save the other from lossCorrect
  2. BA pledge is always oral, whereas indemnity must be written
  3. CA pledge involves three parties, whereas indemnity involves four
  4. DA pledge protects against loss caused by another person, whereas indemnity concerns goods as security

Explanation

Section 172 makes pledge a bailment of goods as security for a debt or promise. Section 124 makes indemnity a promise to save the other from loss caused by the promisor or any other person. The option reversing these ideas is wrong, and the oral/written and party-count claims are not in the text.

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