Guarantee and Indemnity

Abstract

This chapter tackles guarantee or bond, which has no definitive judicial definition but is widely held to be a contract in which the guarantor agrees to be answerable for the debt or default of another to a third party. It cites the primary obligation of a third party that is underwritten by the guarantor as an essential characteristic of a guarantee. It also explains how the guarantor becomes answerable for the faults of the third party. This chapter talks about the indemnitor that undertakes a primary liability to another party in order to indemnify the other party against a specific event, which may or may not involve the act or default of a third party. It points out that the indemnity contained in construction sub-contracts is the most frequently used form of indemnity in the construction industry.