Distinguish between Contract of Indemnity and Guarantee.

Basis of Distinction Contract of Indemnity Contract of Guarantee Number of Parties There are only two parties: the indemnifier and the indemnified. There are three parties: the surety, the principal debtor and the creditor. Nature of Liability The liability of the indemnifier is primary. The liability of the surety is secondary. The surety is liable only if the principal debtor makes a default, the primary liability being that of the principal debtor. Request of Debtor The indemnifier need not necessarily act at the request of the debtor. The surety gives guarantee only at the request of the principal debtor. Existing Debt/Duty In the case of indemnity, the possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify. In the case of a guarantee, there is an existing debt or duty, the performance of which is guaranteed by the surety. Right to Sue Third Parties The indemnifier cannot sue third-parties in his own name, unless there be assignment. He must sue in the name of the indemnified. The surety, on payment of the debt when the principal debtor has failed to pay, is entitled to proceed against the principal debtor in his own right.