Contract of indemnity under the Indian Contract Act, 1972

Simple meaning of the word indemnity is making good the loss incurred by another person. For example, when X contracts to indemnify Y against failure to repay loan amount by Z, this is called indemnity. The Contract of indemnity is defined under section 124 of The Indian contract Act 1872 as “a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity”. The definition itself limits the scope of indemnity, it restricts indemnity to cases where there is a promise to indemnify against loss, which is caused either by the promisor himself or by any other person. So it excludes all from its purview cases of loss arising from any other reason such as natural calamities etc.

Parties to contract of indemnity

The parties of a contract of indemnity are indemnity-holder and indemnifier wherein the former is the person who gives indemnity and latter is the person for whose protection the indemnity is given.

Modes of indemnity

The contract of indemnity can be both expressed and implied. A contract of indemnity is said to be expressed when parties expressly promise to compensate the other from the loss and it is said to be implied when promise to compensate is inferred from the conduct of parties or circumstances of the case.

Some other essentials of contract of indemnity

•Valid contract

Essentials of a valid contract that are given under section 10 of The Indian Contract Act, 1872 must also be present in the contract of indemnity.

•Loss to one party

The indemnifier can indemnify the indemnity holder only if the latter has suffered some damage or it has been certain that he will suffer some loss.

Rights of indemnity holder

The rights of indemnity holder are specifically laid down in section 125 of The Indian Contract Act, 1872 as follows

Right to recover damages

The indemnity holder reserves the right to recover all the damages that he is compelled to pay in any suit in respect of any matter covered by the contract of indemnity.

Right to recover costs

The indemnity holder has the right to recover all the costs which he is compelled to pay in bringing or defending such a suit. Provided that  the indemnifier authorised him to defend or bring the suit or the indemnity holder did not contravene the orders of the indemnifier and the indemnity holder had acted as it would have been prudent for him to act in the absence of any contract of indemnity.

Right to recover sums paid

Provided that it was not contrary to the instructions of the indemnifier the indemnity holder holds the right to recover any sum that he may have paid under any suit or compromise.

Right of indemnifier

Rights of indemnifier are not specifically mentioned in The Indian Contract Act, 1872 but it was held in Jaswant Singh v. Section of State 14 BOM 299,  that the rights of the indemnifier are similar to the rights of a surety under that is given under section 141 of the Indian Contract Act, 1872.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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