Rights of Indemnity Holder In Points with Examples

CA, Intermediate, IPCC

Define a Contract of Indemnity:- 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 any other Person activity is called a Contract of Indemnity.

Under the Contract of Indemnity mainly two parties will involve.

Indemnifier:- The Party who promises to indemnify the other from loss.

Indemnified:- The Party who is promised to be saved against the loss.

The Rights of Indemnity Holder or Indemnified

The Promise in a Contract of Indemnity has an authority to recover the Damages From the Promisor. They are explained below.

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 as per the norms and law. The Damages are

Ordinary Damages.
Special Damages
Explanatory Damages, …etc.

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 as it would have been prudent for him to act in the absence of the contract of indemnity. If the promisor authorized him in bringing or defending the suit.

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Right of Recovering Sums:- All Sums or amount 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.

As per this Section and rule, The rights of the indemnity-holder are not absolute or unfettered. He must act within the authority given to him by the promisor and must not contravene the orders of the promisor. Further, he must act with normal intelligence, Caution, and Care with which he would act if there were no contract of Indemnity.

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