BUSINESS LAW

CONTRACT OF INDEMNITY
 TEAM
 KATHIRESAN

 BALAJI RAO

 PARAMITA KUNDU

 SUPRIYA

 VIKRAM
 DEFINITION

A contract by which one party promises to

save the other from loss caused to him by
the conduct of the promiser itself or by the
conduct of any other person is called as
“CONTRACT OF INDEMNITY”.
 EXAMPLE 1

A contracts to indemnify B against the

consequences of any proceedings which C
may take against B in respect of a sum of
Rs.200.
This is a contract of Indemnity.
 DEFINITION IS NOT
EXHAUSTIVE…..
 Definition is not exhaustive as given in
Indian contract Act.

 It includes:
* Express promises to indemnify
* Cases where the loss is caused by
the promisor itself or by the conduct of any
other person.
 It does not include:
* Implied promises to indemnify
* Cases where loss from accidents
and events is not depending on the
conduct of the promiser or any other
person
 EXAMPLE 2
“RAM contracts with government of India to
return to India from abroad after completing
his studies and serve government of India
for a fixed period.
He fails to return to India. This is
CONTRACT OF INDEMNITY and he is
bound to reimburse the government of
India”.
 Indemnifier & Indemnity
holder

Indemnifier Indemnity Holder

Promiser Promisee

A person who promises A person whose loss is to

to make good the loss be made good
Indemnify:
To save from losses
 ESSENTIALS OF INDEMNITY
CONTRACT

 It must contain all elements of valid

contract

 The promisee must have suffered the loss

 EXAMPLE 3
 MARTIN & JOHN claim certain goods from
a railway company as rival owners. Martin
takes delivery of the goods by agreeing to
compensate the railway company against
loss in case John turns out to be the true
owner of the goods.
This is a contract of of indemnity
between Martin & Railway Company.
 MAY BE IMPLIED OR
EXPRESS…….

The CONTRACT OF INDEMNITY may be

implied or express.

The implied contract of indemnity may be

inferred from the circumstances of the
case or from the relationship of the
parties.
 EXAMPLE 4
Adamson Vs Jarvis :
Adamson on the instruction of Jarvis,
sold certain cattle belonging to Jamal. Jamal
held Adamson liable for it and recovered
damages from him for selling it. Adamson
could recover the loss from Jarvis as a
promise made by him to Adamson from any
such loss would be implied from his conduct
in asking Adamson to sell the cattle.
 RIGHTS OF INDEMNITY-HOLDER
WHEN SUED………..
Sec 125 deals with rights of Indemnity-
holder when sued. According to it, an indemnity
holder is entitled to recover from the promisor,

• All the damages which he may be

compelled to pay in any suit in respect of any
matter to which the promise to indemnify
applies.
 All the costs which he may be compelled to
pay in bringing or defending such suits. But
the indemnified should have acted as any
prudent man would act under similar
circumstances in his own case, or with the
authority of the indemnifier.
 All sums which he may have paid under the
terms of any compromise of any such suit.
The compromise should not be contrary to
the orders of the indemnifier & should be
prudent or authorized by the indemnifier.
 RIGHTS OF INDEMNIFIER

The right of an indemnifier (promiser) are

analogous to the right of surety under
section of the Act under 141.
 TIME OF COMMENCEMENT OF
INDEMNIFIER’S LIABILITY
 It is unspecified in Indian contact Act
under contract of Indemnity.
 Different high courts follow different rules.
 In some high courts ,”the indemnifier is
not liable untill the indemnified has
incurred actual loss”.
 “The Indemnified can compel the
indemnifier to make good his loss even
before he actually discharges his liability.
 “Indemnity is is not given by repayment
after payment and it requires that the party
to indemnified shall never be called upon to
pay”.

 “If the indemnified had incurred a liability is

absolute,he is entitled to call upon the
indemnifier to save him from that liability
and pay it off”
“Based on equitable principles,” To indemnify
does not mean to reimburse in respect to
moneys paid,but to save from loss in respect
of liability against which the indemnity has
been given..if it be held that payment is a
condition precedent to recovery, the contract
may be of little value to the person to be
indemnified,who may be unable to meet the
claim in the first instance”.
THANK YOU