Contract of indemnity, Meaning,Example, Parties and their rights

Contract of indemnity.

Meaning

Contract of indemnity defined under section 124 of Indian contact act 1872. That is "A contract by which one party promises to save Other from loss cause to him by the conduct of promiser himself or by conduct of any other person"

Indemnity in simple 'protection against future loss'

For Example

'A person has fire insurance with insurance company. Subsequently a person suffer loss due to fire . In this case he need not worry because Insurance company will compensate as it was a contract of indemnity'.

A contract of indemnity arise either 

1. By an express promise 

2. By operation of law.
For example., The duty of principal is to indemnify an agent from consequences of Lawful acts done by him as an agent. Similarly,on a transfer of share, the transferee, in law, undertakes to indemnify the transferor against all future calls.

Contract of indemnity should satisfy all the condition of valid contract.

All essentials of valid contract are 

1. Consideration.

2. Free consent.

3. Compentancy .

4. Lawful objects .

For Example"There are two persons A and B . A goes to B and  said beat X and I will compensate. B goes and beat X and as a consequence he had to pay a fine of RS. 5000. Afterwards B cannot claim money from A as it was a void contract because the object was not Lawful.

Contract of indemnity cover only loss caused :-

1 By the conduct of promisor himself

2 By the conduct of any other person

And thus loss caused by the conduct of promisee or an act of God is not covered.

Parties under contract of indemnity.

1. Indemnifier- Who promise to save from the loss

2. Indemnity holder- A person who is compensated 

Rights of Indemnity holder- or Indemnified (Section 125)

1 To claim damage -  If Indemnfier has promised to indemnify in respect to any matter and the indemnified has paid damages in respect to a suit in court for that matter indemnity holder has right to hold such damages.

2 To claim Cost- If indemnified has paid cost in any case whether he filed the case or someone filed the case against him . He has can recover such cost but main condition is . He should not contravened the order of the indemnifier

3.To claim sums- If indemnified has paid money for settelement of a case he has right to claim such money. But the compromise should not be the contrary to the order of the indemnifier.