Meaning of contract of indemnity
Rights and duties of indemnifier and indemnity holder
Meaning of contract of guarantee
Types of guarantee
Differences between indemnity and guarantee
Rights, duties and liabilities of surety
Discharge of surety from liability
Meaning and definition of contract of indemnity
Literally, indemnity means where a person is victim of loss, compensation to him is to be provided or to save him from the loss caused by different causes. To indemnify means to compensate or to make good of the loss. The contract of indemnity means a promise or statement of liability to pay compensation for a loss or for wrong in a transaction.
In the law of contract, indemnity is the obligation, undertaken by one party to cover the loss or debt incurred by another. It is similar to a contingent contract, a part of general contract and is of special nature.
According to the Sec. 22 of NCA- ‘where any person has concluded a contract relating to indemnity with the provision to pay to any party to a contract or a third person for any loss or damage that may result from his actions, he may realize as compensation.’
According to the Sec. 124 of ICA- A contract by which one party promises to save the other from loss, caused to him by the contract of the promisor himself or by the conduct of any other person, is called a contract of indemnity. The definition of ‘contract of indemnity’ as given in the Indian Contract Act is not exhaustive. It includes:
express promises to indemnify, and
cases where the loss is caused by the conduct of the promisor himself or by the conduct of any other person.
It does not include:
implied promises to indemnify, and
cases where loss arises from accidents and events not depending on the conduct of the promisor or any other person.
In English law, it is defined in a wider sense than the above laws as: ‘A promise to save another party from a loss caused as a result of transaction entered into at the instance of the promisor.’ It covers all types of losses caused by events or accidents (personal or natural).
According to the Dictionary of Garner on modern legal usages- ‘Indemnity is a security or protection against a contingent hurt, damage or loss.’
According to the Black’s law Dictionary- ‘Indemnity is an undertaking whereby one agrees to indemnify another, upon the occurrence of the anticipated loss.’
Thus, a contract of indemnity is really a part of the general class of contingent contracts. It is entered into with the object of protecting the promisee against anticipated loss. The contingency upon which the whole contract of indemnity depends is the happening of loss. The person who promises to make good the loss is called the indemnifier (promisor) and the person whose loss is to be made good is called the indemnified or indemnity-holder. A contract of indemnity is a species of the general contract. As such it must have all the essential elements of a valid contract.
Example: A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of Rs. 200/-. This is a contract of indemnity.
Example: A and B go into a shop. B says to shopkeeper, ‘Let him (A) have the goods. I will see you paid.’ The contract is one of indemnity. [Goulston Discount Co. Ltd. V. Clark (1967)2 Q.B. 493]
A contract of indemnity differs from indemnity for the breach of contract. The first is related to the contract to bear the anticipated loss by one party (Sec. 22 of NCA) and the latter one is related to the damage for the breach of contract by the breaching party (Sec. 83 of NCA)
Rights and duties of indemnifier and indemnity holder
Meaning of contract of guarantee
Types of guarantee
Differences between indemnity and guarantee
Rights, duties and liabilities of surety
Discharge of surety from liability
Meaning and definition of contract of indemnity
Literally, indemnity means where a person is victim of loss, compensation to him is to be provided or to save him from the loss caused by different causes. To indemnify means to compensate or to make good of the loss. The contract of indemnity means a promise or statement of liability to pay compensation for a loss or for wrong in a transaction.
In the law of contract, indemnity is the obligation, undertaken by one party to cover the loss or debt incurred by another. It is similar to a contingent contract, a part of general contract and is of special nature.
According to the Sec. 22 of NCA- ‘where any person has concluded a contract relating to indemnity with the provision to pay to any party to a contract or a third person for any loss or damage that may result from his actions, he may realize as compensation.’
According to the Sec. 124 of ICA- A contract by which one party promises to save the other from loss, caused to him by the contract of the promisor himself or by the conduct of any other person, is called a contract of indemnity. The definition of ‘contract of indemnity’ as given in the Indian Contract Act is not exhaustive. It includes:
express promises to indemnify, and
cases where the loss is caused by the conduct of the promisor himself or by the conduct of any other person.
It does not include:
implied promises to indemnify, and
cases where loss arises from accidents and events not depending on the conduct of the promisor or any other person.
In English law, it is defined in a wider sense than the above laws as: ‘A promise to save another party from a loss caused as a result of transaction entered into at the instance of the promisor.’ It covers all types of losses caused by events or accidents (personal or natural).
According to the Dictionary of Garner on modern legal usages- ‘Indemnity is a security or protection against a contingent hurt, damage or loss.’
According to the Black’s law Dictionary- ‘Indemnity is an undertaking whereby one agrees to indemnify another, upon the occurrence of the anticipated loss.’
Thus, a contract of indemnity is really a part of the general class of contingent contracts. It is entered into with the object of protecting the promisee against anticipated loss. The contingency upon which the whole contract of indemnity depends is the happening of loss. The person who promises to make good the loss is called the indemnifier (promisor) and the person whose loss is to be made good is called the indemnified or indemnity-holder. A contract of indemnity is a species of the general contract. As such it must have all the essential elements of a valid contract.
Example: A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of Rs. 200/-. This is a contract of indemnity.
Example: A and B go into a shop. B says to shopkeeper, ‘Let him (A) have the goods. I will see you paid.’ The contract is one of indemnity. [Goulston Discount Co. Ltd. V. Clark (1967)2 Q.B. 493]
A contract of indemnity differs from indemnity for the breach of contract. The first is related to the contract to bear the anticipated loss by one party (Sec. 22 of NCA) and the latter one is related to the damage for the breach of contract by the breaching party (Sec. 83 of NCA)
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