Q. 1 Writes a note on the contract of indemnity and its modes. OR Discuss the right of indemnity holder
Ans: MEANING OF INDEMNITY
The term ‘indemnity’ means to make good the loss or to compensate the party who has suffered some loss.
MEANING OF CONTRACT OF INDEMNITY [SECTION 124]
A contract, by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”.
A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of Rs 200/=. This is a contract of indemnity. There are two parties involved in this contract.
1. Indemnifier 2. Indemnity-Holder
MEANING OF INDEMNIFIER
The person who promises to make good the loss is called the ‘indemnifier’. In the aforesaid example, A is the indemnifier.
MEANING OF INDEMNITY-NOLDER
The person whose loss is to be made good is called Indemnity-holder’. In the aforesaid example, B is the indemnity-holder.
RIGHT OF INDEMNITY HOLDER
Following are the rights of indemnity holder:
1- SUIT EXPENDITURE RECOVERY
All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies.
2- RIGHT OF LOSS RECOVERY
It is a right of the indemnity holder of recover all the losses for the indemnifier, which he is compelled to pay in the related suit.
3- COMPROMISE COST RECOVERY
All costs which he may be compelled to pay, in bringing or defending such suit if, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit.
4- RIGHT OF INDEMNITY
Under Sec 140- 141
“If any one is entitled to the benefit of all the securities which the creditor has against the principal debtor, whether he was aware of them or not?”
MODE OF CONTRACT OF INDEMNITY
A contract of indemnity may be express or implied.
(a) A contract of indemnity is said to be express when a person expressly promises to compensate the other from loss.
(b) A contract of indemnity is said to be implied when it is to be inferred from the conduct of the parties or from the circumstances of the case.
X an auctioneer, sold certain goods at the instruction of Y. Later on, it is discovered that the goods belonged to Z and not Y. Z recovered damages from X for selling his goods. Here, X is entitled to recover the compensation from Y because there was an implied promise to compensate the auctioneer for any loss, which he may suffer on the defective title of goods sold by auction.
ESSENTIAL ELEMENTS OP CONTRACT OP INDEMNITY
In addition to the implied or express promise to indemnify, all the essentials of a valid contract must also be present. 0
X asks Y to beat Z and promises to indemnify Y against the consequences. Y beats Z and is fined Rs.1,000/=. Y cannot claim this amount from X because the object of the agreement was unlawful.