Friday, May 15, 2009

Essentials or features of a contract of indemnity

A valid contract of indemnity should fulfill the following conditions:

i. Anticipated loss: A contract of indemnity is a security for an anticipated loss.

ii. Requirements of valid contract: Contract of indemnity being a species of contract must have all essentials of a valid contract like free consent, competence of the parties, consideration, etc.

iii. To save other party: There must be a promise to save the other party from some loss.

iv. Covers only the actual loss: It covers only the actual loss may be due to the promisor himself or any other person and it covers only the loss caused by an event mentioned in the contract. The event mentioned in the contract must happen.

v. May be express or implied: The contract of indemnity may be express or implied. An express promise is one where a person promises to compensate the other party in express term. Implied promise is one where the conduct of the promisor shows his intention to indemnify the other party from loss.

vi. Depend on good faith: This contract depends on good faith.

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