TMI Blog1940 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ted items should be dealt with. 2. The contract, exhibit A, is in the form of a letter dated March 12, 1935; it is addressed by the plaintiff to the defendant and says : With reference to the business in shares, securities and other commodities which I have agreed to canvass from my constituents approved by you, and to introduce and place with or procure tot you I hereby agree with you as follows :- That I shall be answerable and responsible to you for all business secured by me from my constituents and to be answerable and responsible for the due payments by the said constituents for all moneys due in respect of such business as you may from time to time transact at my request and I agree on demand to make good any default on part of my said constituents and also to pay all damages, costs, charges and expenses that may be incurred by you or due to you by reason of such default. It is agreed that I shall be entitled to get 50% return of brokerage for business secured by me. 3. That is a common form of sub-brokerage contract, under which the sub-broker gets fifty per cent, broker's commission, introduces constituents to the broker and is answerable to the broker f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act to answer for the debt, default or miscarriage of another shall be in writing. The ground on which the English Courts based their decisions was that under a contract of this nature the guarantor is not interested solely in the guarantee, he is interested in the subject-matter of the contract, because his is getting substantial payments under the contract, and therefore the contract is one of indemnity and not of guarantee. 5. Apart from that, I think that the contract is a contract of indemnity within the meaning of the Indian Contract Act. Section 124 defines a contract of indemnity as being a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person. This contract seems to me clearly to fall within the terms of that definition. The promisor is agreeing to save the promisee from loss occasioned by the conduct of the constituents introduced. On the other hand, a contract of guarantee is defined in Section 126 in these terms : A 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract of suretyship. Unless he has done that, the surety is not in a position to compel the principal debtor to pay the debt. In my view, therefore, exhibit A is a contract of indemnity and not a contract of guarantee the principal debtors, namely the constituents introduced by the plaintiff not only knew nothing of the alleged guarantee, but were unascertained when the contract was made. 6. But even if I am wrong on that point, I feel no doubt whatever that under exhibit B the plaintiff is liable to pay the whole amount of ₹ 16,176 therein referred to. Exhibit B is, I should say, neither a contract of guarantee nor a contract of indemnity. It is a contract to pay an agreed sum ascertained, I will assume, as the amount due on a contract of guarantee. I can see no answer on the part of the plaintiff to a suit against him for payment of the agreed amount. No doubt, had such a claim been made against him, he would have been entitled to require the defendant to assign to him the debts covered by his contract, and if the creditor had compromised some of those debts without consulting the plaintiff, the plaintiff might have challenged the compromise. But he would then hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very first element required to make it a contract of guarantee, when the letter of March 12, 1935, was passed, is wanting in this case. Sutton Co. v. Grey [1894] 1 Q. B. 285 and Montagu Stanley Co. v. J. C. Solomon, Ltd. [1932] 1 K. B. 625, where the contracts between the broker and a person who stood in the position of a sub-broker were in almost similar terms, decided that the contract was one of indemnity and not of guarantee. The test there laid down is where the sub-broker is interested in the transaction to be effected, apart from the fact that he had agreed to be liable, the contract is one of indemnity. There is nothing to show that Section s 124 and 126 give a go-by to this distinction which has been so well recognized in England. 3. Periamanma Marakkayar v. Banians Co. (1925) I.L.R. 49 Mad. 156 was also relied upon by the appellant. It seems to me that in the absence of three parties, in which one is a principal debtor and another a creditor, unless the third party, who is the surety, agrees to make good the loss, the transaction is not complete. Individual contracts between the principal debtor and creditor, and between the creditor and surety, are not sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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