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CA Foundation Contract of Indemnity and Guarantee — practice questions

Explore 70 free Contract of Indemnity and Guarantee questions in CA Foundation Businesslaw. Open each question or exercise to read its content, reference answers and available explanation.

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Contract of Indemnity and Guarantee questions and exercises with answers

Showing questions 1–30 of 70.

How many parties are there to a contract of indemnity?Read the answer and worked solution →Which of the following is NOT a contract of indemnity?Read the answer and worked solution →A contract of guarantee under Section 126 involves how many parties?Read the answer and worked solution →Under Section 126, a contract of guarantee:Read the answer and worked solution →A guarantee obtained by the creditor by misrepresenting or concealing a material part of the transaction is:Read the answer and worked solution →A guarantee that extends to a series of transactions is called a:Read the answer and worked solution →A guarantee confined to a single debt or transaction, which ends once that debt is discharged, is a:Read the answer and worked solution →Under Section 128, the liability of the surety is:Read the answer and worked solution →Under Section 137, mere forbearance by the creditor to sue the principal debtor:Read the answer and worked solution →On paying the guaranteed debt, the surety acquires all the rights the creditor had against the principal debtor. This right is called:Read the answer and worked solution →Under Section 146, in the absence of a contrary agreement, co-sureties for the same debt are liable to:Read the answer and worked solution →Under the Indian Contract Act, a contract in which one party promises to save the other from loss is called what?Read the answer and worked solution →A promises to cover B's loss caused by a stranger C. What is this?Read the answer and worked solution →In a contract of indemnity, the party who gives the promise to save the other from loss is called what?Read the answer and worked solution →Which sections of the Indian Contract Act deal with indemnity?Read the answer and worked solution →Under Section 125, the indemnity-holder can recover what?Read the answer and worked solution →Costs of a suit are recoverable from the indemnifier if the holder did what?Read the answer and worked solution →Compromise sums are recoverable under Section 125 if the compromise was what?Read the answer and worked solution →A contract to perform the promise or discharge the liability of a third person in case of his default is what?Read the answer and worked solution →In a contract of guarantee, the person who gives the guarantee is known as what?Read the answer and worked solution →A bank lends money to X on the guarantee given by Y. In this arrangement, who is the principal debtor?Read the answer and worked solution →How many parties are involved in a contract of guarantee?Read the answer and worked solution →Under Section 126, a guarantee may be made in which form?Read the answer and worked solution →How does indemnity differ from guarantee in number of parties?Read the answer and worked solution →C, with no consideration, later promises to pay for goods sold to B. The promise is what?Read the answer and worked solution →C guarantees B's payment in return for A's delivery of goods on credit. Consideration?Read the answer and worked solution →Section 128 says the liability of the surety is generally what, compared with the principal debtor's?Read the answer and worked solution →Surety's liability can differ from the principal debtor's only if what?Read the answer and worked solution →A guarantees payment of a bill of exchange accepted by C. C dishonours the bill. For what is A liable?Read the answer and worked solution →A guarantees payment for tea B supplies to C from time to time, up to 100 pounds. What kind of guarantee is this?Read the answer and worked solution →

Worked practice questions

How many parties are there to a contract of indemnity?

  1. One
  2. Two — the indemnifier and the indemnified
  3. Three
  4. Four
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Correct answer: B. Two — the indemnifier and the indemnified

An indemnity has two parties: the indemnifier (who promises to make good the loss) and the indemnified or indemnity-holder.

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Which of the following is NOT a contract of indemnity?

  1. A life insurance contract
  2. A marine insurance contract
  3. A fire insurance contract
  4. An express promise to compensate for a third party's conduct
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Correct answer: A. A life insurance contract

Fire and marine insurance are contracts of indemnity, but a life insurance contract is not, since it pays a fixed sum rather than indemnifying an actual loss.

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A contract of guarantee under Section 126 involves how many parties?

  1. Four
  2. Two
  3. One
  4. Three — surety, principal debtor and creditor
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Correct answer: D. Three — surety, principal debtor and creditor

A guarantee is a tripartite arrangement among the surety (who guarantees), the principal debtor (whose default is guaranteed) and the creditor (to whom it is given).

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More Businesslaw topics

Negotiable Instruments Act 1881Nature of ContractsAgencyThe Limited Liability Partnership Act 2008PartnershipBreach of Contract and its RemediesPerformance of ContractCompanies Act 2013