Indemnity And Guarantee MCQ Quiz in తెలుగు - Objective Question with Answer for Indemnity And Guarantee - ముఫ్త్ [PDF] డౌన్‌లోడ్ కరెన్

The correct answer is Option 2

Key Points

•  According to Section 138 of the Indian Contract Act, when a creditor decides to release one of the co-sureties, it doesn't mean that the other co-sureties are relieved from their obligations.
• Instead, only the surety who is released is freed from their obligations towards the creditor.
• Nevertheless, this released surety continues to have obligations towards the other co-sureties.
• This ensures that the principle of shared responsibility among co-sureties is maintained, even if the creditor chooses to release one of them from their contractual obligations.

The correct answer is option 2

Key PointsAs per Section 127 of Indian Contract Act states that anything done or any promise made for the benefit of the principal debtor may be a sufficient consideration for the surety to give the guarantee. This means that the consideration for the guarantee can extend beyond monetary payments and include actions or promises benefiting the principal debtor.

The correct answer is either 1) or 2).

Key Points

• Section 126 of the Indian Contract Act, 1872, provides for the “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.
• It states that—A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”.
  A guarantee may be either oral or written.

The correct answer is option 1.

Key Points

•  Continuing Guarantee has been defined under Section 129 of Indian Contract Act, 1872 as a guarantee which extends to a series of transactions.
• A continuing guarantee may be revoked by the surety:
  • At any time;
  • As to the future transactions;
  • By serving a notice to the creditors.

The correct answer is option 1.

Key Points

•  In present case, it is contract of indemnity.
• The contract of indemnity has been defined under Section 124 as a person promises another to save him from any kind of loss incurred due to the act of promisor himself or any other person.
• Contract of Guarantee has been provided under section 126 as a contract to perform the promise, or discharge the liability, of a third person in case of his default.
• Pledge has been defined under Section 172 as the bailment of goods as security for payment of a debt or performance of a promise.
• Bailment has been defined under Section 148 as the 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.

The correct answer is Rights of indemnity-holder when sued.

Key Points

• Section 125 of the Indian Contract Act, 1872, provides for the Rights of indemnity-holder when sued.
• It states that —The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor—
  (1) all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies;
  (2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit;
  (3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.

The correct answer is ​A guarantee applicable to a series of transactions.

Key Points

•  A "continuing guarantee," as defined in Section 129, pertains to a guarantee that spans across multiple transactions rather than being limited to a singular transaction.
• This type of guarantee remains in effect for a series of transactions, indicating an ongoing commitment from the guarantor.
• Illustrations
  (a) A, in consideration that B will employ C in collecting the rent of B's zamindari, promises B to be responsible, to the amount of 5,000 rupees, for the due collection and payment by C of those rents. This is a continuing guarantee.

The correct answer is A is liable upon his guarantee.

Key Points

• The above question is taken from the illustration (b) of Section 130.
• Section 130 provides for the Revocation of continuing guarantee.
• It states that —A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.
• Illustration (b): A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C. C accepts the bill. A gives notice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee.

The correct option is Section 126.

Key Points

• The contract of indemnity and the contract of guarantee are provided under Chapter VIII of Indian Contract Act, of 1872.
  • The contract of indemnity is the contract where one person compensates for the loss of the other.
  • As per section 126 of the Indian Contract Act 1872, a “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his
    default.
• Contract of Guarantee:-
  • Guarantee means to give surety or assume responsibility.
  • It is an agreement to answer for the debt of another in case he makes a default.
  • Three parties are involved in the contract of guarantee: 
    • Surety:
      • The person who gives the guarantee is called the surety.
      • The liability of the surety is secondary, i.e, he has to pay only if the principal debtor fails to discharge his obligation to pay.
    • Principal debtor:
      • The person in respect of whose default the guarantee is given is the principal debtor.
    • Creditor:
      • The person to whom the guarantee is given is called the creditor.
      • A guarantee is either in the format of writing or oral.
      • This contract lets the principal debtor avail employment, loan or goods on credit and the surety would ensure repayment in case of any default on the part of the debtor.

The correct option is All are incorrect.

Key Points

• Contract of Indemnity:-
  • The term indemnity is derived from the Latin word “indemnis” which denotes uninjured or suffering no damage or loss.
  • It is a sort of security or protection against loss.
  • Indemnity is to indemnify one person by bearing his losses incurred to him by the conduct of promissory or by any other party.
  • Section 124 of the Indian Contract Act, of 1872 defines a contract of indemnity as a contract wherein 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. In an indemnity contract, there are only two parties i.e.,
    • The Indemnifier: The promisor, who agrees to make up for the damage caused to the other group.
    • The Indemnified: The person who is assured of compensation for the damage incurred (if any) is referred to as the indemnity holder or the indemnified.
• Types of Indemnity:-
  • Express Indemnity:
    • This is also known as written indemnity.
    • Under this, all the terms and conditions of the indemnity are mentioned specifically in the contract.
    • The rights and liabilities of both parties are set out in the agreement.
    • This type of agreement includes insurance indemnity contracts, construction contracts, agency contracts, etc.
  • Implied Indemnity:
    • ​It refers to that indemnity wherein the obligation arises from the facts and the conduct of the parties involved.
    • This is not a written contract.
    • The core example of this type of indemnity is the master-servant relationship.
    • The master is liable to indemnify his servant for the losses that he incurred while working as per his instruction.