Indemnity and Guarantee - Business Law (BBS 2nd Year)

Introduction/ Definition of Indemnity:

Define Indemnity and write down the right and duties of Indemnity holder.

IndemnityIndemnify means to compensate or to make good of the loss and contract of indemnity means a promise or statement of liability to pay compensation for a loss or for a wrong in transaction. In the law of contract indemnity is the obligation, undertaken by one party to cover the loss or debt incurred by another. Indemnity is an assurance given by the promisor to promisee that he/ she will make good or save from loss which is raised from their contract for example: 'Samsung' company agreed to make hardware for 'Apple' company, and it will be responsible for the loss and make it for apple. If 'Samsung' sell the product made for apple. In such transaction, if any loss caused to 'Apple' , whatever may be the reason, 'Samsung' is bound to pay the compensation to 'Apple' and Insurance contract. Who gives such assurance known as indemnifier and to whom that assurance is given is known as indemnity holder or indemnified.

Right and Duties of Indemnity Holder:
Indemnity holder is the party who has been assured of recovery of a loss by the indemnifier. NCA 2056 has made the provision regarding the rights of an indemnifier. The rights and duties of Indemnity holder is given below:

# Rights:
a) Indemnity holder can claim for compensation for damages suffered from the transaction. The indemnity..
holder can recover any or all of the amounts of compensation under the contract.

b) He/She can recover all damages which he/ she may be compelled to pay in any suit in respect of any matter to which the promise to indemnity applies.

c) All the cost spent on the case filed or defended by him in connection relating to indemnity.

d) He/ She can recover all the cost of legal action, if it becomes necessary to initiate such an action for a failure to pay the amount mentioned in all the above causes.
 Along with such rights But the indemnifier will not be liable for the loss in the following circumstances.

# Duties:
a) If He/ She  works negligently.

b) If he/she is acting with the intention of causing any loss or damage.

c) If the indemnity holder is acting against the instruction of other party (Promisor) . 
note: he/she means indemnity holder. ( when writing duties you must write eg. Indemnity holder mustn't act and work negligently or something like that.)

#Rights and Duties of an Indemnifier:
The above duties or liability of indemnity holder is the right of indemnifier. Thus the duties of indemnifier arises in the following circumstances:

i) There must be a loss in accordance with the contract to make the indemnifier liable.

ii) There must be an occurrence of the anticipated event. Without any occurrence of the prescribed contingent event, there is no indemnity by the indemnifier.

iii) Where the right of indemnity is used by the indemnity holder prudently and the instruction of the indemnifier is not contravened or when there is no breach of contract.

iv) If the cost demanded by the indemnifier are not caused by negligence, haphazard behavior. 

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