Features of Contract of Indemnity

1. Parties to the Contract: In a contract of indemnity, there must be two parties to the contract, which are the indemnifier and the indemnity holder. In no case may the indemnifier and indemnity holder be the same person.

2. Presence of All Essential Elements: In order to constitute a valid contract of indemnity, it is important that all the essential elements of a valid contract be present in the contract; for example, there should be free consent, the contract must be for a legal subject matter, etc.

3. Written or Implied: The contract of indemnity can either be express (i.e., a contract that is made by words, either spoken or written) or implied (i.e., a contract made by the conduct of the party or by the circumstances of the case).

4. Promise to Indemnify: A contract of indemnity is created only for the purpose of protecting or saving one of the parties to the contract from loss or damage as agreed. It is important that one party promise the other party to save from the losses; the promise to save from the losses is the subject matter of the contract of indemnity.

5. Only One Contract: In a contract of indemnity, there exists only one contract, viz., the contract between the indemnity holder and the indemnifier.

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

Similar Reads

Contract of Indemnity

Section 124 of the Indian Contract Act 1872 contains the definition of a contract of indemnity which states, “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.”....

Features of Contract of Indemnity

1. Parties to the Contract: In a contract of indemnity, there must be two parties to the contract, which are the indemnifier and the indemnity holder. In no case may the indemnifier and indemnity holder be the same person....

Rights of an Indemnity Holder

As per the provision of Section 125 of the Indian Contract Act 1872, when the promisee of the contract of indemnity acts within the scope of his authority as vested by the Indian Contract Act, he shall have the following rights:...

Liabilities under Contract of Indemnity

It is interesting to note that the Indian Contract Act 1872 has not provided for the time of commencement of liability for indemnifiers. However, while referring to several landmark judgments and referring to major judicial pronouncements, it can be established that the liability of an indemnifier begins as and when the liability of the indemnity holder becomes absolute and certain. This proposition has been observed by the courts in several cases....

Conclusion

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. A 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 Sections 124. The indemnity contract can either be implied or express and it is important that one party should promise the other party to indemnify from losses. The act also discusses the rights of the indemnity holder. The contract act also establishes that the liability of an indemnifier commences as and when the liability of the indemnity holder becomes absolute and certain....

Contract of Indemnity- FAQs

What is a Contract of Indemnity?...

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