CONTRACT OF INDEMNITY (SECTION 124)

• Indemnity – TO SAVE OR PROTECT FROM LOSS.

• ACC TO sec 124-
• One party promises to save the other
• from loss caused to him
• by the conduct of promisor himself or by the conduct of any
other person
• is called CONTRACT OF INDEMNITY.
• It is a type of CONTINGENT CONTRACT whose purpose is to protect the
promisee from anticipatory loss.
• Person who promises to save the other party from the loss is called
INDEMNIFIER.
• The person to whom such promise made is called INDEMNITY HOLDER.

• EXAMPLE- Insurance Company.

 Rights of Indemnity Holder (sec-
125)
• Example- A sells his house to B. A agrees to indemnify B if the title of
house is found to be defective. Later, C claims the title of house & sues B
for trespass.
• B WILL HAVE FOLLOWING RIGHTS:
• 1- recover damages
• 2- Recover expenses for defending suit against him.
• 3- Recover any amount paid under compromise{out of court settlement}
 Time of commencement of indemnifier’s
Liability (sec 125)
• COURTS HAVE HELD THAT:
1- Indemnifiers may be called upon to pay even before the indemnity holder has discharged his
liability.
2- Provided the indemnity holder’s liability should have become absolute.
THIS MEANS:
Indemnifier does not need indemnity holder to pay first & then he will be reimbursed by the
indemnifier.
FOR EXAMPLE-
A indemnifies B against any legal action that C may take against B
C files a suit against B
&B is asked to pay 50,000 rs to C by court.
Here A may be required to pay directly to C
without having B pay first.