Contract of indemnity vs. Guarantee

To learn about the distinctions between the guarantee and indemnity contracts, continue reading.

Difference	Contract of Indemnity	Contract of Guarantee
Parties	Two parties are involved: Indemnity holder and Indemnifier	Three parties are involved: Creditor, Surety, and Principal Debtor
Number of contracts	There is one contract between the indemnifier. It is to make good the losses (repay)incurred by the indemnity holder.	There are three contracts. Between the principal debtor and the creditor to fulfill the liability and pay dues Between the creditor and surety, where the surety will pay off dues if the principal debtor defaults Between the principal debtor and surety, where the principal debtor makes good the losses of the surety incurred to fulfill the guarantee
Nature of liability	The indemnifier has primary liability. The liability for the indemnifier may or may not come up and is contingent.	The surety has a secondary liability. They’re only liable to pay when the principal debtor does not pay and defaults.
Third person default	An indemnifier’s liability does not depend on the default by another person. It arises as per the losses.	A surety’s liability depends on the default by the principal debtor.
Principal debt	A principal debt is not required for an indemnity contract.	A principal debt is necessary for the promise of repayment.
Subsequent recovery	The indemnifier cannot recover the indemnified amount from anyone.	The surety can recover the guarantee amount from the principal debtor.
Contract type in India	Can be written or oral	Can be written or oral

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