Indemnity Bond-Compiled By Vr Avinash Kulkarni

It is a surety bond used by governments, businesses and individuals to establish assurance that an agreement will be fulfilled as stated

The Indemnity Bond outlines a pledge to compensate, financially or otherwise, one party if the second party fails to fulfill a contract or obligation

Indemnity Bond and Undertaking

It is a form of surety that one provides while undertaking to indemnify and to assure that an event of possible losses/damages of nature as mentioned in the bond and/or due to the reasons provided in the bond, he shall be duly compensated

Indemnity Bond Legality in India

Yes, it is legal in India and practiced on a large scale as well even government agencies are also involved in such activities

Indemnity means protecting someone from consequences of few activities whose happening or non happening is not certain

Rule of Indemnity

Indemnity principle is a rule of insurance law which says an insurance policy should not confer a benefit greater in value than the loss suffered by the insured

Need of Indemnity Clause

Indemnity clauses are used to manage the risks associated with a contract, because they enable one party to be protected against the liability arising from the actions of another party

Indemnity Limitation Period

Normally, the period is 6 years for an ordinary agreement, commencing from the date of the beach.

It is critical to understand that the limitation period in relation to an indemnity clause starts from the date on which the indemnifier refuses to honour the indemnity

Point of an Indemnity

It is a contractual transfer of risk between two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of specified result

Rights of Indemnity Holder (As per section 125 of Indian Contract,1872)

1) Damages – in a contract of indemnity the indemnity holder is entitled to recover from the promise and indemnifier all damages for which he may be compelled to pay in any suit as of any matter to which the promise the indemnity applies while acting within the scope of his authority

2) Costs – any person with indemnity holder and indemnified or promise is entitled to recover from promisor lol costs which he may be compelled to pay in any suit in bringing or defending it if he does not go against the order of the promisor and if he has acted in absence of any contract as would have been prudent for him to do

3) Sums – an indemnity holder is entitled to recover from indemnified all sums which he has paid under the terms of compromise of any suit and compromise was not against the order of the promisor and the compromiser was not against the order of the promisor and the compromise was such that it was to be done (prudent) in absence of any contract of indemnity

Explanation of Rights of Indemnity Holder

If any person has agreed the indemnity a person against a particular claim and debt, demand and an action is brought on that demand the indemnity holder ie the defendant have to give notice to the indemnifier to come and defend the action if he does not come and refuses to do as he asked

Thus he has to compromise on best term and can bring an action under indemnity contract

Affidavit

It is a statement on oath stating that all 4th e statements made are true and correct to the knowledge and no material information has been concealed

Should I sign Indemnity Bond

It’s still your business decision whether you sign them or not, but you should do so only where it is a critical contract that you have no way of modifying or negotiating changes

In contract the best kind of indemnity agreement is commonly called a Mutual Indemnity Agreement or a Mutual Hold Harmless Provision

Section 499 of the Indian Penal Code and Law of torts on Defamation

Principle in a civil action for defamation, truth of the defamatory matter is an absolute defence, however, the burden of proving truth is on dependent, and he is liable if he does not successfully discharge this burden

Essentials of Indemnity Contract

1) parties to a contract – two parties, namely, promisor or indemnifier and the promisee or indemnity holder

2) Protection of loss – a indemnity contract is entered into for the purpose of protecting the promisee from the loss

3) Express or Implied – the indemnity contract may be express (ie made words spoken or written) or implied (ie inferred from the conduct of the parties or circumstances of the particular case)

4) Number of Contracts – in indemnity contract, there is only one contract that is between I’ve Indemnifier and Indemnified

Rules of Indemnity by different High Courts

1) Indemnifier is not liable until the indemnifier has suffered a loss

2) Indemnified can compel the indemnifier to make good hid loss although he has not discharged his liability

Gajanan M Parelkar Vs Moreshwar M Mantri (1942) 44 BOMLR 703, dated 01/04/1942 Bombay High Court Decision on Indemnity

If the Indemnified has incurred a liability and the liability is absolute, he is entitled to call upon the indemnifier to save him from the liability and pay off

Shankar Nimbaji Vs Laxman Sapdu / Chand Bibi Vs Santosh Kumar Pal Case on 20/09/1939 – Bombay High Court

Indemnifier is not liable until the indemnified has suffered the loss

Indemnification meaning

The action of compensating for actual loss or damage sustained, the payment made with this object

Letter of Indemnity

A written undertaking by a third party ie Bank on behalf of one of the parties to a transaction or contract, to cover the other party against specific kiss or damage arising out of the action (or a failure to act) of the first party

Rights of Indemnifier

1) It is a well known principle of law that where on person has agreed to indemnify another, he will making good the loss, be entitled to all the ways and means by which the person indemnified might have protected himself against or reimbursed himself for the loss

2) indemnifier is not liable for indemnity if the indemnity holder acts negligently and is acting with the intention of causing any loss or damage or if he is acting against the instructions of the other party (promisor)

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