Rights and Duties of indemnifier25th September 2022 0 By indiafreenotes
The rights of the indemnity-holder are the duties of indemnifier, and duties of the indemnity-holder are the rights of the indemnifier. Discharge of contract means the termination of a contractual relationship between parties. The indemnity contract essentially involves one party promising to make good for the loss of the other. These losses may arise either due to the conduct of the other party or due to someone else and the discharge of a contract means the termination of contractual obligations.
Parties to the contract of Indemnity
The contract of indemnity consists of two parties:
- Promisor or Indemnifier: The person who promises to bear the loss. For eg: ‘P’ is the indemnifier or promisor because he promises to bear the loss of ‘Q’.
- Promisee or Indemnity holder: The person whose loss is covered or who are compensated.
Essentials of Contract of Indemnity
- Parties to a contract: There should be two parties, namely, promisor or indemnifior and promisee or indemnity or indemnity holder.
- Loss Prevention: A contract of indemnity is entered into for the purpose of protecting against damage. Damage may be caused by the conduct of the promisor or any other person.
- Express or implied: A contract of indemnity may be expressed (i.e. made by spoken or written words) or implied (i.e. from the conduct of the parties or circumstances of a particular case).
- Essentials of a valid contract: A contract of indemnity is a special type of contract. The principles of common law of contract contained in Sections 1 to 75 of the Indian Contract Act, 1872 apply to them. Therefore, it must have all the essentials of a valid contract.
- Number of contracts: In a contract of indemnity, there is only one contract which is between the Indemnifier and indemnified.
Rights of the Indemnity holder
- Right to recover damages paid in a suit [Section 125 (1)]: An indemnity holder has the right to recover from the indemnifier which he may be obliged to pay in any suit in respect of the contract of Indemnity applies.
- Right to recover cost incurred in defending a suit [Section 125(2)]: An Indemnity holder has the right to recover the cost incurred by him in defending a law suit in the court of law.
- Right to recover amount paid under compromise [Section 125(3)]: An Indemnity holder has the right to recover the amount paid by him in any compromise under the suit from the Indemnifier.
Rights of Indemnifier
It is a well-known principle of law that where one person has agreed to compensate another, he will agree to do well for his losses, so Indemnifier has right to protect or reimburse himself in any way or means from the losses.
Duties of Indemnifier
The duties of an indemnifier arise in the following circumstances:
- There must be a loss in accordance with the contract to make the indemnifier liable.
- There must be an occurrence of the anticipated event. Without any occurrence of the prescribed event, there is no indemnity by the indemnifier.
- 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.
- If the costs demanded by the indemnifier are not caused by negligence, haphazard behaviour.
Duties of Indemnity holder = Rights of Indemnifier
Except as otherwise stated in the contract, the indemnifier shall not be liable for damages under the following circumstances. He is also called the duty of indemnity-holder.
- Duty to Act Prudently: Except as otherwise stated in the contract, the indemnifier shall not be indemnified for the loss caused by the negligence of the indemnity holder. In other words, it is the duty of the indemnity-holder to act prudently.
- Duty not to cause any harm or loss: If the indemnity-holder acts with the intention of causing any loss or damage, the indemnifier shall not be liable for such loss. In other words, it is the duty of the indemnity or holder not to cause harm or harm.
- Duty to comply with the intentions of the Indemnifier: If the indemnity-holder acts against the instruction of the other party or the promisor, the indemnifier shall not be liable for such damages as the Indemnity holder goes beyond the instructions given by the Indemnifier. In other words, it is the duty of the indemnity-holder to follow the intent of the promoter.