Answer 1 :

Section 124 of Indian Contract Act 1872 defined Contract of Indemnity as when one person promises to
save and protect another from any loss caused by conduct of some other person or by himself.
A contracts to indemnify B against any legal proceedings initiated by C concerning a specific sum of
money. Subsequently, C obtains a court judgment against B for this amount. Without making any
payments towards the judgment, B sues A for the full amount.

Parties to contract- 2

●​ Indemnifier: A person who promises to indemnify or pay for the losses is known as an
indemnifier.
●​ Indemnified: A person for whom such a promise is made is known as an indemnified or
indemnity holder.

Here according to the question, A is an indemnifier to B as he promises B to protect him from any
loss that will be concerning a specific sum of money. So if we see section 125 of the Indian Contract
Act, 1872. The rights of the indemnity holder are given-

125(1)- right to recover against all damages

125(2)- right to recover against all costs

125(3)- right to recover against all sums

The word “recover” is explicitly mentioned and C without paying th damages, filed the suit. He
cannot be successful.

Answer 2:
A entered into a purchase agreement with B for the purchase of a motor vehicle, agreeing to pay
monthly installments of Rs. 10,000. C provided a guarantee for these payments. A defaulted on several
installments. Subsequently, A and B agreed to a revised payment schedule, whereby A would pay Rs.
2,000 immediately and the remaining arrears at the end of the month.

Section 126 of Indian Contract Act defines Contract of Guarantee as “ It’s a contract to perform or
discharge the liability of a third person in
case of his default ”
As per the same section, the legal role are as follows:
1. Surety- The person who gives the guarantee is called the surety. In this case, c is the surety.
2. Principal Debtor - The person in respect of whose default the guarantee is given is called the Principal
Debtor. In this case, A is the PD.
3. Creditor- The person to whom the guarantee is given is called the Creditor. In this case, B is the
creditor.

This is known as continuing guarantee. Defined (u/s 129) as a guarantee which extends to a series of
transactions is called as continuing guarantee.
The liability of the surety extends to all the transactions contemplated until the revocation of the
guarantee.
The creditor and principal debtor revised their payment schedule without the knowledge of the surety.
Thereby discharging his liability as per Section 133.
By variance in the terms of the Contract - A surety is liable for what he has undertaken in the contract.
When the terms of the contract between the principal debtor and the creditor are varied without the
surety’s consent, the surety is discharged as to the transactions subsequent to the variance.

Answer 3:
The assertion that a surety enjoys a “privileged status as a favored debtor” suggests that a surety holds
certain advantages or protections not typically afforded to an ordinary debtor. A comprehensive
evaluation of this assertion requires examining the surety’s role, rights, and liabilities in the context of
debt law.

Liabilities of surety :
•​ Secondary Liability: A surety is only liable if the principal debtor defaults. The creditor must first
demand performance from the principal debtor before seeking repayment from the surety.
​ •​ Co-Extensive Liability: The surety’s liability is usually co-extensive with that of the
principal debtor. This means the surety cannot be held liable for more than the debtor’s obligation.
However, if the principal debtor partially pays the debt, the surety’s liability is reduced accordingly.

Rights of Surety
1.​ Rights against Principal Debtor
i) Right of Indemnity(Protection against future loss)(Legal exemption from liability for damages)(A sum
of money paid in compensation for loss or injury) (u/s 145) - There is an implied promise by the principal
debtor to indemnify the surety. The surety is entitled to claim all the sums from the principal debtor which
he has rightfully paid to the creditor.
ii) Right of Subrogation((law) the act of substituting{Working as a substitute for someone} of one creditor
for another) (u/s 140) - On payment of a debt, the surety shall be entitled to all the rights which the
creditor could claim against the principal debtor.

2.Rights against Creditor

i) Right to claim securities (u/s 141) -The surety can claim all the securities which the creditor had at the
time of the giving of guarantee.
ii) Right to set off- Any amount recoverable by the principal debtor or surety may be claimed as
deduction.(An amount or percentage deducted)
 3. Rights against Co-sureties
i) Right to contribution (u/s 146 and 147) - When a debt is guaranteed by two or more sureties, they are
called co-sureties. All the co-sureties shall contribute equally or in different sums towards the guaranteed
debt. When one of the co-sureties makes payment to the creditor, he has a right to claim contribution from
the other co-surety or co-sureties.
For example, A, B and C are sureties to Z for the sum of Rs 30,000 lent to D. D makes default in
payment. A, B and C are liable, as between themselves, to pay Rs. 10,000 each.
ii) Right to share benefit of securities- If one co-surety receives any security, all the other co-sureties are
entitled to share the benefit of such security.

Answer 4:
Definition (u/s 148)- “Delivery of goods by one person to another for some purpose, upon a contract, that
they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the
directions of the person delivering them”

Duties of Bailee
1. To take reasonable care of the goods bailed (S.151)- The bailee is bound to take as much care of the
goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own
goods of the same bulk, quality and value as the goods bailed.
2. Not to make any unauthorised use of goods bailed (S. 154) - If the bailee uses the goods bailed in a
manner which is inconsistent with the terms of the contract, he shall be liable for any loss even though he
is not guilty of negligence and even if the damage is the result of an accident.
3. Not to mix the goods bailed with his own goods (S. 157)- The bailee must not mix the goods of the
bailor with his own goods, but must keep them separate from his own goods. If he mixes the bailor’s
goods with his own goods without the bailor’s consent and the goods cannot be separated, then the bailee
is bound to bear the expenses for the loss of the goods.

4. To return the goods on fulfilment of the purpose (S. 160)- It’s the duty of the bailee to return the
goods, without waiting for demand from bailor, if the time is specified in the contract has expired or when
the purpose specified in the contract is accomplished. If a bailee is not in a position to deliver back the
goods, then the bailee will be liable for that loss.
5. To deliver profit on the goods bailed (S. 163)- In the absence of any contract, the bailee is bound to
deliver to bailor any profit which may have accrued from the goods bailed

Rights of Bailee
1. Right to recover necessary expenses incurred on bailment (S. 158)- The bailee has a right to recover
necessary expenses from the bailor. For ex- A leaves his horse with his neighbour, B for safe custody for
one week. B is endorsed to recover the expenses incurred by him in feeding the horse.
2. Right to recover compensation (S. 164)- The bailee has the right to recover compensation from the
bailor, if the bailor has no title to the goods and as a consequence, the bailee suffers some loss.
3. Right of Lien (S. 170 and S. 171)- Lien is the right of the bailee under which the bailee can retain the
goods of the bailor and refuse to deliver them to the bailor, until his due remuneration for services in
respect of the goods bailed or the amount due is paid.
4. Right of suit against wrongdoer ( S 180)- The bailee has a right to sue a third party who makes some
damages to the goods or who deprives him from using the goods.

Answer 5:
Pledge by Non- Owners
1.Pledge by mercantile agent [Section 178]: Where a mercantile agent is,with the consent of the owner, in
possession of goods or the documents of title to goods, any pledge made by him, when acting in the
ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at the
time of the pledge notice that the Pawnor has no authority to pledge.
The necessary conditions of validity under the section 178 are as follows: (i) The person pledging the
goods must be a mercantile agent, (ii) Mercantile agent must be in possession either of the goods or the
documents of title to goods, (iii) Such possession must be with the consent of the owner. If possession has
been obtained dishonestly or by a trick, a valid pledge cannot be effected (iv) Pledge must have been
made by the mercantile agent, when acting in the ordinary course of business of a mercantile agent, (v)
The pledgee must act in good faith; (vi) The pledgee should have no notice of the pledger's defect of title.
If the pledgee knows that the pledger has a defective title, the pledge
will not be valid.

2. Pledge by person in possession under voidable contract [Section 178A]: When the pawnor has obtained
possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the
contract has not been rescinded at the time of the pledge, the pawnee acquires a good title to the goods,
provided he acts in good faith and without notice of the pawnor’s defect of title.

3. Pledge where pawnor has only a limited interest [Section 179]: Where a person pledges goods in which
he has only a limited interest, the pledge is valid to the extent of that interest.