Indemnity and guarantee are both legal concepts that involve the assumption of liability for the actions or debts of another person. However, they differ in their scope, purpose, and legal implications.
Indemnity
Indemnity is a legal agreement in which one party agrees to compensate the other party for any loss, damage, or liability that may arise from a specified event or circumstance. The indemnitor (the party providing indemnity) assumes full responsibility for any harm caused to the indemnitee (the party receiving indemnity) and agrees to pay for any damages or losses that may occur. Indemnity is typically used in commercial transactions to allocate risk between parties and protect against unforeseen events.
Guarantee
A guarantee, on the other hand, is a promise by one party to take responsibility for the actions or debts of another party if that party fails to perform its obligations. The guarantor agrees to pay for any losses or damages suffered by the creditor if the debtor fails to fulfill its obligations. Guarantees are often used in loan agreements or commercial transactions to provide security to creditors and to reduce the risk of default.
