Indemnity.: This Definition Provides The Following Essential Elements

Section 124 A contract by which one party promises to save the otherfrom loss caused to
him by the conduct of the promisor himself or by the conduct of any other person is a
"contract of Indemnity.
lustration - 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.
This definition provides the following essential elements
1. There must be a loss.

2. The loss must be caused either by the promisor or by any other person (in Indian context
loss is to be caused by only by a human agency.)
3. Indemnifier is liable only for the loss.
Thus, it is clear that this contract is contingent in nature and is enforceable only when the loss
occurs.
Rights of Indemnifier:
After compensating the indemnity holder, indemnifier is entitled to all the ways and means
by which the indemnifier might have protected himself from the loss.
Relevant Case Laws
Rights of the indemnity holder:
Section 125, defines the rights of an indemnity holder. These are as follows
The promisee (Indemnity holder) in a contract of indemnity, acting within the scope of his
authority, is entitled to recover from the promisor (Indemnifier). These are:
1. Right of recovering Damages all damages that he is compelled to pay in a suit in

respect of any matter to which the promise of indemnity applies.
2. Right of recovering Costs -all costs that he is compelled to pay in any such suit if, in
bringing or defending it, he did not contravene the orders of the promisor and has acted asit
would have been prudent for him to act in the absence of the contract of indemnity, or if the
promisor authorized him in bringing or defending the suit.
3. Right of recovering Sums -all sums which he may have paid under the terms of a
compromise in any such suite, if the compromise was not contrary to the orders of the
promisor and was one which would have been prudent for the promisee to make in the
absence of the contract of indemnity, or if the promisor authorized him to compromise the
suit.
| Contract of Indemnity (Section 124) |Contract of Guarantee (Section 126)
It is a bipartite agreement between the indemnifier and It is a tripartite agreement between the Creditor,
indemnity-holder. Principal Debtor, and Surety.
Liability of the surety is not contingent upon any
Liability of the indemnifier is contingent upon the loss. loss.
Liability of the surety is co-extensive with that of the
principal debtor although it remains in suspended
animation until the principal debtor defaults. Thus, it
Liability of the indemnifier is primary to the contract. is secondary to the contract and consequently if the|
principal debtoris not liable, the surety will also not
be liable.
The undertaking in a guarantee is collateral to the
The undertaking in indemnity is original. original contract between the creditor and the
principal debtor.
There is only one contract in a contract of indemnity |There are three contracts in a contract of guarantee -|
between the indemnifier and the indemnity holder. an original contract between Creditor and Principal
Debtor, a contract of guarantee between creditor and
surety, and an implied contract of indemnity|
between the surety and the principal debtor.
The reason for a contract of indemnity is to make good The reason for a contract of guarantee is to enable a
on a loss if there is any. third person get credit.
Once the guarantor fulfills his liabily by paying any
Once the indemnifier fulfills his liability, he does not debt to the creditor, he into the shoes of the
get any right over any third party. He can only sue tne creditor and gets all the steps
rights that the creditor had
indemnity-holder in his own name. over the principal debtor.
Thus in nutshell we have understood that

i)Contracts of Indemnity has been defined as: "A Contract whereby 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."
ii) The term is often used in business contracts and in insurance.
ii) Indemnity, in simple words, is protection against future loss.
iv) The term 'Indemnity Agreement' is often used in the US.
v) Contract of Indemnties should all satisfy the conditions of a valid contract.
vi) All Contracts of Insurance are Contracts of Indemnity except life insurance.
vii) The indemnity holder can call upon the indemnifier to save him from loss even before
the actual loss is incurred.

Indemnity.: This Definition Provides The Following Essential Elements

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Section 124 A contract by which one party promises to save the otherfrom loss caused to

lustration - A contracts to indemnify B against the consequences of any proceedings

This definition provides the following essential elements

1. There must be a loss.

Rights of the indemnity holder:

1. Right of recovering Damages all damages that he is compelled to pay in a suit in

Thus in nutshell we have understood that

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