CONTRACT LAW ASSIGNMENT CONTRACT OF INDEMNITY
Indemnity Indemnity as a concept concept can be expressed as “[a] duty to make good of any loss, liability liability and dama damage ge incu incurr rred ed by othe other, r,”” or alte alterna rnati tive vely ly “the “the right right of an inju injure red d party party to ask for for reimbursement for its loss, liability or damage from a person who has such a duty” !he literal meaning of Indemnity is "ecurity from loss Its legal usage comes at a time when a person promises to other to save him#her from the loss incurring from his performance of duty Indemnity was first established in the case of Adamson of Adamson v v Jarvis Jarvis1 !he plaintiff, plaintiff, an auctioneer, auctioneer, sold certain cattle on the instruction instruction of the defendant defendant It turned out that the livestock didn$t belong to the defendant, but to another person, who made the auctioneer liable and the auctioneer in turn sued the defendant for the loss he had thus suffered by acting on the defendant$s direction !he court held that the plaintiff having acted on the re%uest of the defendant and was entitled to assume that, if, what he did, turned out to be wrongful, he would be indemnified indemnified by the defendant "ection &'( of the )ontract *ct, &+' defines a contract of Indemnity as - a contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the the conduct of any other personpersonIn the case of Richardson Richardson Re, ex parte The Governors of St. Thomas ospital ! , .uckley /0 observed that, Indemnity is not necessarily given by repayment after payment Indemnity re%uires that the party to be indemnify in the first instanced shall never be call upon to pay
1 1(2 3" &&', &'2 " )t &&&', / 4d 2 5&6&&7'8. 91, &1 5)*7
INDRAVEER SINGH
CONTRACT LAW ASSIGNMENT "imilarly in the case of "iverpool #ort$a$e %nsurance &o.'s Re,( 8ennedy /0 observed, “that indemnity does not merely mean to reimburse in respect of the moneys paid, but to save from the loss in respect of the liability against which the indemnity has been given because otherwise indemnity may be worth very little if the indemnity:holder is not able to pay in the first instance” POSITION
IN INDIA
!he process of definition in India is restricted to cases where there is promise to indemnify for the loss caused by 5i7 5ii7
by the promiser himself, or by any other person
In the case of Ga)anan #oreshwar *arel+ar v. #oreshwar #adan #antr i , It was discussed that the indemnity might be of little worth indeed if the indemnified could not enforce his indemnity till he had actually paid the loss If a suit was filed against him, he had actually to wait till a judgment was pronounced, and it was only after he had satisfied the judgment that he could sue on his indemnity It is clear that this might under certain circumstances throw an intolerable burden upon the indemnity:holder ;e might not be in a position to satisfy the judgment and yet he could not avail himself of his indemnity till he had done so !herefore the )ourt of e%uity stepped in and mitigated the rigor of the common law and held that where the indemnified has incurred a liability and that liability is absolute, he is entitled to call upon the indemnifier to save him from that liability and to pay it off In the case of The -ew %ndia Assurance &ompany "td. v. The State Tradin$ &orporation of %ndia "td. and Anr, !he ;on$ble 5&6&(:&6&17 *ll 4? ?ep &&1+ 5)*7 4 5&6('7 (( .@A/? 9=
INDRAVEER SINGH
CONTRACT LAW ASSIGNMENT Ga)anan #oreshwar *arel+ar v #oreshwar #adan #antri and held that, in view of "&'( of the Indian )ontract *ct, where the defendant promises to indemnify is an absolute one In the judgment the /aw )ommission of India accepted the view that, to indemnify, does not mean to reimburse in respect of the money paid, but, in accordance with its derivation, to save from loss in respect of the liability against which the indemnity has been given Indian )ontract *ct does not specifically provide that there can be an implied contract of indemnity !he Brivy )ouncil has, however, recogniCed an implied contract of indemnity also1 !he /aw )ommission of India in its &=th ?eport, &61+ on the Indian )ontract *ct, &+', has recommended the amendment of "ection &'( *ccording to its recommendation, “!he definition of the D)ontract of Indemnity$ in "ection &'( he expanded to include cas es of loss caused by events which may or may not depend upon the conduct of any person It should also provide clearly that the promise may also be implied” VALIDITY
!he principles applicable to contracts in general are also applicable to such contracts so much so that the rules such as free consent, legality of object, etc, are e%ually applicable Ehere the consent to an agreement is caused by coercion, fraud, misrepresentation, the agreement is voidable at the option of the party whose consent was so caused *s per the re%uirement of the )ontract *ct, the object of the agreement must be lawful *n agreement, the object of which is opposed to the law or against the public policy, is either unlawful or void depending upon the provision of the law to which it is subject RIGHT OF THE INDEMNITY HOLDER – (SECTION 125)
*n indemnity holder who is acting within the scope of his authority is entitled to the following rights F 5 "ecretary of "tate v !he .ank of India /td *I? &6=+ B) &6&
INDRAVEER SINGH
CONTRACT LAW ASSIGNMENT & ?ight to recover damages F ;e is entitled to recover all damages which he might have been compelled to pay in any suit in respect of any matter covered by the contract ' ?ight to recover costs F ;e is entitled to recover all costs incidental to the institution and defending of the suit = ?ight to recover sums paid under compromise F ;e is entitled to recover all amounts which he had paid under the terms of the compromise of such suit ;owever, the
compensation must not
be against the directions of the indemnifier It must be prudent and authoriCed by the indemnifier ( ?ight to sue for specific performance F ;e is entitled to sue for specific performance if he has incurred absolute liability and the contract covers such liability
INDRAVEER SINGH
