OEE !emnity Contracts: Nature * The word indemnity has been derived from the Latin term “indemnis” which means unhurt or free from loss. * Acontract of indemnity basically involves one party promising the other party to make good its losses. * These losses may arise either du that of somebody else. * To indemnify somethin; words, it means that o1 suffers some losses. e to the conduct of the other party or 1g basically means to make good a loss. In other ne party will compensate the other in case it * Sec. 124-127 of the Indian Contract Act, 1872 provide for it, aity Contracts: Nature nnity is a kind of compensation that protects you n any potential losses, Jemnity refers to the payment of money to a person who has lost money, goods, or other property due to the error of a third party. * This concept of indemnity is also incorporated in English law, and is considered a commitment to protect a person from losses due to his actions, which might be directly or indirectly caused. .indemnity Contracts: Nature * An indemnity contract may be either express or implied. * A contract of indemnity is one of the most important forms of commercial contracts. * Several industries, such as the insurance industry, rely on these contracts. * This is because of the nature of these contracts. They basically help businesses in indemnifying their losses and, therefore, reduce their risks.= indemnity Contracts: Rights * The indemnity holder can enforce the following rights against the indemnifier (Sec. 125): 1) The indemnifier will have to pay damages which the indemnity holder will claim in a suit. 2) The indemnity holder can even compel the indemnifier to pay the costs he incurs in litigating the suit. 3) If the parties agree to legally compromise the suit, the indemnifier has to pay the compromise amount.nity Contracts: Rights e Act does not provide any rights to the indemnifier. * However, it is taken as a silent acceptance of the rights of the promisor. * Therefore, it is made equivalent to the rights of a surety under Section 141 of the Indian Contract Act. * With this explanation of the Act the rights of the indemnifier are the same as those of a surety in a contract of guarantee. ifnity Contracts: Nature ontract of indemnity has a contingent nature, i.e., it a conditional structure, and it mainly provides a afeguard provision for potential risks and uncertainties. +A contract of indemnity is just like any other contract, and it must necessarily follow all the requirements of a valid contract.inity Contracts: Essentials the purpose of a contract of indemnity, the following onditions must be satisfied: 1. Contracts of indemnity must be between two parties, the indemnifier and the indemnity holder or indemnified, 2. Acontract of indemnity should contain an offer, a consideration, the free consent between parties, the competency of both parties and legality of object to become a valid contract. 3. There should be a promise between two parties whereby one party promises another to save him from any losses suffered by him. indemnity Contracts: Essentials 4. The losses may be due to the conduct of the promisor himself or any other person. 5. Contracts of indemnity can be express or implied. In an express contract of indemnity, a promise is made by a person to compensate the other person in express terms but in an implied contract, it is the intention of the promisor to indemnify the other party from lossesy Contracts: Nature under Sec. 124 of the Indian Contract Act, 1872 is lirr ict of the promisor or of another person but it does es by accidents or events that are not caused by humar », indemnity under Sec. 124 of the Act covers only express mnity, and not implied promise of indemnity. i.- ae Case law New India Assurance co Ltd. V State Trading Corporation of India (2007) The Court observed, “almost all insurances other than life and personal accident insurance are contracts of indemnity. The insurer’s promise to indemnify is an absolute one. A suit can be filed immediately upon failure of performance, irrespective of actual loss. Of the indemnity holder, incurred liability was absolute, he would be entitled to call upon the indemnifier to save him from that liability by paying it off.” ‘