Contract of Indemnity

Topic – Contract Of Indemnity.

Indemnity means protection. Protection against loss in form of money, goods etc. Section 124 of The Indian Contract Act defines Contract of Indemnity as a contract by which one party promises to save the other from loss caused to him by the conduct of the promiser himself or by the conduct of any other person.

The person who promises to make good the loss is called the indemnifier (Promiser).

The person whose loss is to be made good is called an Indemnity holder or Indemnified.

The contract of Indemnity is a form of contingent contract as the liability of the indemnifier is based on an event whose occurrence is contingent. Further, the liability of the indemnifier is primary and independent. It is characterized by all the essential elements of a valid contract i.e. lawful object, consideration, free consent of the parties, the capacity of the parties to Contract etc.( given under Section 10 of The Indian Contract Act 1872).

Illustration: Z contracts with Zee that Zee will compensate for all the loss suffered by Z if he losses his credit card and someone uses it. This is a contract of Indemnity. And Zee will be liable to pay Z only when both the conditions are fulfilled.

                                             The mode of the contract of Indemnity can be express or implied.

Illustration: Suppose A sold a house to B on the instruction of C. Afterwards, it was disclosed that D is the registered owner of the house. D recovered the amount from A for selling his house. Now, A can recover his paid amount from C. This is an implied form of a contract of indemnity.

Position in India:- To compensate another for his loss, it should be caused by the conduct of the promisor himself or by the conduct of any other person ( given under Section 124). It does not cover a promise to compensate for loss not arising due to human agency. Thus, if under a contract of insurance, an insurer promises to pay compensation in the event of loss by fire, such a contract will be valid as being contingent contracts as defines in Section 3 of The Indian Contract Act 1872.

Case law – United India Insurance Company v. M/s. Aman Singh Munshilal.

Facts- A consigner was to reach its destination but before that, it was supposed to be kept in go down. While the goods were in go down it got destroyed by fire. It was held that the goods were destroyed in transit due to fire, and the insurer was liable as per the insurance contract.

Position in England-: Under English Law, the word ‘indemnity’ carries a much wider meaning that given under The Indian Contract Act. It includes a contract to save the promisee from a loss whether it be caused by human agency or any other event like an accident or fire. Under English Law, a contract of insurance ( other than life insurance) is a contract of indemnity. A Life Insurance contract is however not a contract of indemnity because in such a contract different considerations apply. Above all, any amount of money cannot be compared with someone’s life unlike property and harm caused in different ways.

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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