Analysing Contract of indemnity by Bhumica M @lexcliq

Analysing Contract of indemnity


By Bhumica M


REVA University, Bangalore


The term (Indemnity) means to make good the loss or to compensate for the losses. To protect the promisee from unanticipated losses, parties enter into the contract of Indemnity. Indemnity means protection against the loss. In other words it is the compensation for the person who has incurred loss. For 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 200 rupees. This is a contract of indemnity.

Section 124 of the Indian contract Act gives out provision for contract of indemnity. Section 124 defines contract of indemnity as a contract by which one person promises to save another person from loss caused to him by the conduct of the promiser himself or by the conduct of any other person. The person who indemnifies is called an indemnifier and the person who benefits from it is called an indemnity holder. The famous case of contract of indemnity is Adamson v. Jarvis 1827, in this case Adamson was an auctioneer Jarvis gave cattle to Adamson and asked him to sell this in auction. Adamson followed the instructions of Jarvis and sold it. Later he came to know that Jarvis was not the real owner of the cattle. The real owner of the cattle sued Adamson for damages. In return Adamson sued Jarvis. So the court held that Adamson just followed the instructions of Jarvis so he was in a position to presume that if any damages occurred it would be given by Jarvis. So Jarvis was ordered to pay compensation to Adamson according to the contract of indemnity. 

The nature of contract of indemnity includes that this contract is applicable only when the loss is caused by human agency. This type of contract can be seen when there are agreements, special relationships like employer and employee, master and servant, principal and agent. It can also be done by various statutes like company Act, labour compensation act as such.

The rights of the indemnity holder are specified under section 125 of the Indian contract Act. Wherein it is mentioned that the indemnity holder can claim all the damages from the indemnifier and also he can claim all the charges which are costed upon him due to the proceeding charges and the court fee and lawyer fees as such. 

In an indemnity deal, one party is responsible for any harm or loss incurred by the other party as a result of the promisor’s or other party’s actions. A simple indemnity provision in a contract does not necessarily resolve liability issues because the law discourages people from attempting to transfer their own liability onto others or attempting to escape liability. Liability problems will never be solved by a simple indemnity clause. 

The law is not on the side of those who wish to avoid liability or seek a waiver of responsibility for their conduct. The fundamental reason is that a careless party should not be able to completely shift all claims and damages made against him to another, non-negligent party.


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