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:
1. Recover Damages Paid in a Suit: The indemnity-holder can seek compensation from the promisor, i.e., the indemnifier, for any damages incurred during a lawsuit related to the indemnity contract.
2. Recover Costs Incurred in Defending a Suit: An indemnity-holder can recover costs from the indemnifier if they followed the promisor’s orders and acted prudently in the absence of an indemnity contract, or if the promisor authorized them to bring or defend the suit.
3. Sue for Specific Performance: The indemnity bearer has the right to sue for particular performance if he has incurred absolute liability and the contract protects such obligation.
4. Recover Sums Paid under Compromise: An indemnity-holder also has the right to recover all sums that he might have paid under the conditions of any compromise of the aforementioned suit from the indemnifier, if the agreement reached was not in contrast to the orders of the indemnifier and was one which it would have been prudent for the indemnity holder to make in the general practice.
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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