Page 95 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes three parties, the ‘principal debtor’, the ‘creditor’ and the ‘surety’. Other points of difference
are:
Table 9.1: Difference between Contract of Indemnity and Contract of Guarantee
Contract of indemnity Contract of guarantee
A contract of indemnity is a contract by A contract of guarantee is a contract to perform the
which one party promises to save the other promise or discharge the liability of a third person in case
form the loss caused to him by the conduct of his default.
of the promisor or another person.
The liability of the promisor is primary there The liability of principal debtor is primary and the liabil-
is no secondary liability. ity of surety is secondary.

The contract is express and specific. The contract between principal debtor and creditor is

specific and between the principal debtor and surety is
implied.
There are two parties involved and only one There are three parties involved and three agreements.
agreement.
The promisor cannot file the suit against The surety does not require any subrogation for fi ling of

third person untill and unless the promise suit.

subrogates his right for filling a suit.

Task P contracts to indemnify R against the consequences of the proceedings which
S might take against R in respect of a debt due by R. S obtains judgement against R for
the amount. Without paying any portion of the decreed amount, R sues P for its recovery.
Decide. [Hint: R can claim the amount from P before having actually paid the same.]

Caselet Mary Coleiro vs. the State of NSW

n Mary Coleiro vs. The State of NSW and Others case, Mary Coleiro sued The State of
NSW in District Court proceedings for injuries she alleged to have sustained as a result
Iof an incident which occurred on 5 September 2000.
Ms Coleiro was a cleaner employed by Hydaree Pty Limited, a wholly owned subsidiary of
Tempo Services Limited (“TSL”). TSL entered into a contract for the provision of cleaning
services of public schools with the State Contracts Control Board (on behalf of the State
of NSW Department of Education). Whilst on the school premises, the plaintiff alleged to
have tripped and fallen on a raised section of concrete. She was not performing cleaning
duties at the time, but was on her way to do so. The State of NSW (“The State”) fi led a
cross-claim against TSL, alleging that it was obliged to indemnify it under the terms of a
service contract.
Service providers can take some comfort from the case of Coleiro which supports the view
that a temporal connection between the performance of the service and the loss sustained
is insufficient to invoke an indemnity clause.

In Tanksley v. Gulf Oil Corp. This court held that an oil company cannot invoke an
indemnification agreement with a contractor after settling an injured worker’s claims

because, by settling, the oil company foreclosed its opportunity to have a court determine
that it was free from fault.
Contd...

88 LOVELY PROFESSIONAL UNIVERSITY