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
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