Many business transactions and documents refer to indemnity or indemnification . Non lawyers often refer to the same concept by use of the words hold harmless . In either case, an indemnity is an agreement by one person to pay or perform an obligation of another person.
Indemnity is broader than guaranty .
A guaranty is the agreement by one person to pay the debt of another, but not to do anything else. A guaranty of payment is a direct obligation . In a guaranty of collection, the beneficiary of the guaranty may only sue the guarantor after he has exhausted all reasonable efforts to collect from the primary obligor. A guarantor of collection is also referred to as the secondary obligor. In contrast to a guaranty, an indemnity includes an agreement to perform some other act in addition to mere payment.