Page 93 - DCOM103_COMMERCIAL_LAW

Commercial Law Sukhpreet Kaur, Lovely Professional University

Notes Unit 9: Contract of Indemnity

CONTENTS
Objectives
Introduction

9.1 Meaning of Indemnity
9.1.1 Rights of the Indemnified (i.e., the Indemnity Holder)

9.1.2 Rights of the Indemnifi er
9.1.3 Commencement of Indemnifi er’s Liability
9.1.4 Distinction between a Contract of Guarantee and a Contract of Indemnity

9.2 Summary
9.3 Keywords
9.4 Self Assessment
9.5 Review Questions

9.6 Further Readings

Objectives

After studying this unit, you will be able to:
Understand the meaning and purpose of the contract of indemnity
Explain the essential features of the indemnity
Discuss the different kinds of indemnity
State difference between indemnity and guarantee

Introduction

In last unit, you studied about Contract of guarantee. And now you will know, the law relating
to the contracts of guarantee is given in the Indian Contract Act, 1872 (Ss.126-147). The sections
quoted in this unit refer to the contract of indemnity.

9.1 Meaning of Indemnity

Sections 124 and 125 provide for a contract of indemnity. Section 124 provides that a contract of
indemnity is a contract whereby one party promises to save the other from loss caused to him
(the promisee) by the conduct of the promisor himself or by the conduct of any other person.
A contract of insurance is a glaring example of such type of contracts.
A contract of indemnity may arise either by (i) an express promise or (ii) operation of law, e.g.,
the duty of a principal to indemnify an agent from consequences of all lawful acts done by him
as an agent. The contract of indemnity, like any other contract, must have all the essentials of a

valid contract. These are two parties in a indemnifier and indemnified. The indemnifi er promises

to make good the loss of the indemnified (i.e., the promisee).

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