The rights and the liabilities of both parties are clearly set out in the agreement. This type of agreement includes insurance indemnity contracts, construction contracts, agency contracts, etc. It refers to that indemnity wherein the obligation arises from the facts and the conduct of the parties involved.
This is not a written contract. The core example of this type of indemnity is the master-servant relationship. The master is liable to indemnify his servant for the losses that he incurred while working as per his instruction. These two are the Types of Indemnity given under the Indian contact act. The landmark judgement of implied indemnity is of Adamson vs Jarvis In this case, the plaintiff was an auctioneer and he sold certain goods on the instructions of the master.
Later on, it came to the knowledge that the master was not the real owner of the good and the true owner sued the plaintiff. The plaintiff in turn sues the master to recover the damage. The court held that the master will be liable to indemnify the auctioneer as it was evident from the conduct that he was working under his instructions and there was an implied indemnity agreement between them. As per this section, if a person pays the money on behalf of any other person which is legally bound to pay then he is entitled to reimburse them.
If A is running a shop on lease. When the owner came to collect monthly rent, A was out of town and B paid the rent on his behalf. Now A is liable to reimburse B.
It states that if the surety guarantor pays the money on behalf of the principal debtor, then the debtor is liable to indemnify him by repaying the amount. For example. X took a loan from the bank and Y gave the guarantee for it.
X failed to repay the money and Y were called to pay the dues of the bank. Y paid it but now X will be liable to indemnify Y for the loss he incurred. This section deals with the liability of a principal to indemnify his agent to make good all the losses that he incurred while working in the authority given to him. Section of the Indian Contract Act, deals with the rights of indemnity holder or indemnified when he sued due to the conduct of the promissory or by the other party.
For receiving all the benefits it is necessary that for receiving any type of benefit in an ongoing suit either he shall be authorised by the indemnifier or as per the circumstances, it was prudent to represent.
It is one of the best in the rights of indemnity holder that, In a suit, it may occur that the court ordered the indemnity holder to pay all damages to the third party. Now, he is entitled to receive all these damages from the indemnifier. Free Trial Login. What is Contract Of Indemnity? The promisor or indemnifier The promisee or the indemnified or indemnity-holder. The promisor or indemnifier: He is the person who promises to bear the loss. P is the indemnifier or promisor as he promises to bear the loss of Q.
Q is the promisee or the indemnified or indemnity-holder as his loss is covered by P. The loss may be caused due to the conduct of the promisor or any other person. Duty to comply with the orders of Promisor — If the indemnity-holder acts in contravention of the orders of the Promisor, the indemnifier will not be responsible for such losses which arise due to non-compliance of instructions. This is a significant question which follows these rights and duties of Indemnity Holder.
There is a difference of opinion among the High Courts in India as to whether the indemnified can be demnified before incurring actual losses. The Nagpur [15] and Lahore [16] HCs have held that no indemnity can be claimed until the indemnified suffers actual loss. The HCs of Bombay [17] , Calcutta [18] , Patna [19] , Madras [20] and Allahabad [21] have upheld the position of the Courts of Equity in England, according to which an indemnified can compel the promisor to obtain the indemnity, even before suffering actual damage.
Normally, the limitation period is 6 years, commencing from the date of the breach of the indemnity contract. However, depending on the terms and conditions, and clauses stated in a contract, it is crucial to note that the limitation period may start from the date on which the indemnified refuses to comply with the orders of the indemnifier, or dishonours the indemnity contract.
To sum up, the contract of indemnity is an effective tool to protect and secure a party from losses. The indemnified party is given an advantage to the extent that they need not prove the causation of event, or its proximity to the default of the promisor or any third-party, but simply its occurrence is enough to claim damages. The party is also entitled to claim damages suffered as a result of breach of contract. All this has ensured that the indemnified party comes out unaffected from the consequences of any event bringing harm.
As evident, the provision on rights is not exhaustive, and allows scope for wider interpretation in the interests of equity and justice. Lewis AND Parker vs. Vridhachala Reddi and Anr. Chunder Seekur Mookherjee and Anr. Pachusao, A. Chandu Lal, A. Moreshwar Madan, A. Gopee Ballabh Sen, I. Article 27 imposes a duty on the insured in the form of a limitation clause in exercising the right.
Section 2- Contract of Property Insurance. Article 43 says the event happened and it resulted only in a partial damage or loss to the subject matter of insurance, after being indemnified by the insurer, the insured or the insurer within 30 days may terminate the contract of insurance, unless otherwise specified in the contract.
After the occurrence of the insured event referred to in the preceding paragraph, the insurer may, when paying indemnity, deduct there from a corresponding amount, which the insured has received as indemnity from the third party. This Section can be considered as the most important section, as far as indemnity is concerned. This is because; this section gives the right to the insurer indemnifier to get indemnified, from the third party because of whom the damage has been caused , by exercising subrogation.
As compared to India and China, in Singaporean laws, indemnity is a concept that has left traces in different areas. For example, the concept of indemnity can be found in 1 Commercial Law, Ch. And the loss recoverable by an insured is determined by the type of policy coverage taken out[23]. That is, if the insured claimed compensation from the insurer and he subsequently got the claim, he can still ask for compensation from the third party, because of whom he suffered loss.
So this clause allows an insured person to profit from his own loss[27]. However, it bears noting that an insurers right of subrogation only exists in respect of any insured risks[28], and does not extend to any sums of money received by way of gift[29], unless proven that such gift was to mitigate the effects of his loss [30].
For instance, an insured cannot voluntarily give up his contractual or tortious rights against a third party or admit liability, and he would otherwise be accountable [31].
For example, the guarantee may include a clause which states that, aside from his obligations as a guarantor, each guarantor agrees to indemnify the bank against all claims, losses, etc. In this way, each guarantor has also entered into a contract of indemnity with the lender [33]. When we compare all the four laws, it is essential; to exclude India because of its absence in the insurance contract.
Except India, in all the other laws, indemnity is more involved in insurance contracts. Even though in Singapore indemnity is not just limited to insurance, indemnity clause in insurance contract is stronger.
When we compare English law with Indian, we can see that even though the Indian Contracts Act is an adaptation of English law, English law recognizes Indemnity in insurance contracts. That is according to the English Law, indemnity in insurance is recognized because as compared to Indian law, indemnity is not just a claim for the loss cause due to the act of the third party.
Under English law a person can be indemnified against the act of human and non-human acts. But life insurance has been excluded, basically because the insurance money is not paid just on the occurrence of a contingency. Insurance money is paid either on the expiry of the time-period or on the death of the party insured. In China, the concept of indemnity is just narrowed down to insurance and a comparison with indemnity under Indian Contacts Act is not possible.
But when we compare it with the Singaporean law, it can be identified that Article 45 is quiet relevant and a similar provision is visible in the Singaporean law as well. Article 45 says that the insured indemnity-holder has the right to claim indemnity from both the third party and the insurer, for the loss cause by the act of the third party. And the insurer can also ask for indemnification from the third party.
Or if the insurer has not yet paid the insured, he can deduct the amount the third party is supposed to pay the insured and then pay the remaining. Section 2, The connection between the English law, law of China and Singaporean law is quiet visible, basically because of the presence of indemnity provision in Insurance contracts.
But in India it is limited to certain minor concepts. This project covers all the aspect of the rights of the indemnity holder and the effect of the same on certain specific concepts, and also compares and analyzes it on the basis of different laws in different countries.
Through this project it was possible to analyze the implication and interpretation of a simple concept in various countries.
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