Contract of Indemnity

 What is a Contract of Indemnity? Illustrate your answer.

A Contract of Indemnity is defined under Section 124 of the Indian Contract Act, 1872. It refers to a contract in which one party promises to save the other from loss caused to them by the conduct of the promisor or by the conduct of any other person.

Key Elements of a Contract of Indemnity

  1. Promise to Indemnify: There must be a promise to compensate for the loss.

  2. Loss: The loss must be caused by the conduct of the promisor or any other person.

  3. Protection: The indemnity holder is protected against the loss.

Case Laws Illustrating Contract of Indemnity

  1. Adamson v. Jarvis (1827): In this case, the plaintiff, an auctioneer, sold goods on the instructions of the defendant. It was later found that the goods did not belong to the defendant, and the true owner held the auctioneer liable. The court held that the auctioneer could recover the loss from the defendant who had given the instructions.

  2. Gajanan Moreshwar v. Moreshwar Madan (1942): This case is significant in Indian law. The court held that the indemnity holder could compel the indemnifier to pay off the liability even before the indemnity holder has suffered an actual loss.

Example

Suppose A contracts with B to deliver certain goods to C for a price of ₹10,000. A also promises to indemnify B against any loss arising from the delivery of goods. If B incurs any loss due to the delivery, A is bound to compensate B for the loss.

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