Contract of Indemnity
What is a Contract of Indemnity?
As per the Indian Contract Act 1872, “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 a contract of indemnity.”.
Can a Contract of Indemnity be made for an unlawful act?
No, a contract of indemnity cannot be made for an unlawful act, as it is important that all the essential elements required to constitute a valid contract are present in a contract of indemnity.
What is the scope of the loss that the Contract of Indemnity covers?
A contract of indemnity covers only two types of losses: those caused by the conduct of the promisor or those caused by the conduct of any other person. It is worth noting that any loss caused by an act of God or any natural event is not covered under the contract of indemnity.
Is life insurance also a Contract of Indemnity?
No, life insurance is not a contract of indemnity. As under life insurance, the indemnifier does not promise to indemnify for death; rather, he promises to pay a certain agreed-upon sum in such an event.
State the difference between a Contract of Indemnity and a Contract of Guarantee.
The purpose of a contract of indemnity is to get compensated for losses caused by any event. However, the purpose of the contract of guarantee is to get assurance that the performance of the contract will be done.
Contract of Indemnity: Meaning & Features (Indian Contract Act)
Indemnity means security against losses. When two parties come together to commence a business, the main intention for both parties to formally enter into a contract is to be shielded from any type of probable loss or damage due to the uncertainty of the business. Contract of Indemnity relates to such special circumstances, where it establishes the duties and rights of the parties in a contract in the event of any uncertainty. Contract of Indemnity establishes that one party will pay the other party to the contract in case of any losses or an unprecedented and uncertain event. The Indian Contract Act, 1872, contains provisions related to the Contract of Indemnity under Section 124.
Geeky Takeaways:
- Indemnity means security against loss, or it can also be referred to as making good the loss. Indemnity protects a party from losing money or being affected by uncertainty.
- In an indemnity contract, one party pays another for possible losses or damage.
- The main objective is to get the party that was compensated back to where it was financially before.
- Insurance contracts are a classical example of a Contract of Indemnity.
Table of Content
- Contract of Indemnity
- Features of Contract of Indemnity
- Rights of an Indemnity Holder
- Liabilities under Contract of Indemnity
- Conclusion
- Contract of Indemnity- FAQs
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