Rights of the indemnified (i.e., the indemnity holder):
He is entitled to recover fromthe promisor: (i) All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies; (ii) All costs of suit which he mayhave to pay to such third party, provided in bringing or defending the suit (a) he actedunder the authority of the indemnifier or (b) if he did not act in contravention of orders of the indemnifier and in such a way as a prudent man would act in his own case; (iii) Allsums which may have been paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the indemnifier and was one which itwould have been prudent for the promise to make.
Rights of the indemnifier:
The Act makes no mention of the rights of indemnifier.However, his rights, in such cases, are similar to the rights of a surety under Sec.141,viz., he becomes entitled to the benefit of all the securities which the creditor hasagainst the principal debtor whether he was aware of them or not.
Q.3 What is Partnership? Briefly state special features of a partnership on thebasis of which its existence can be determined under the Indian Partnership Act?Answer:
Partnership is defined as “the relationship between persons who have agreedto share profits of a business carried on by all, or by any of them acting for all”. Onanalysis of the definition, certain essential elements of partnership emerge. Theseelements must be present so as to form a partnership and are discussed below.
1. Partnership is an association of two or more than two persons:
There must be atleast two persons who should join together to constitute a partnership, because oneperson cannot become a partner with himself. These persons must be natural personshaving legal capacity to contract. Thus, a company (which is an artificial person) cannotbe a partner. Similarly, a partnership firm cannot be a partner of another partnershipfirm. As regards maximum number of partners in a partnership firm, Sec.11 of theCompanies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business.
2. Partnership must be the result of an agreement between two or more persons:
An agreement presupposes a minimum number of two persons. As mentioned above, apartnership to arise, at least two persons must make an agreement. Partnership is theresult of an agreement between two or more persons (who are known as partners after the partnership comes into existence)
3. The agreement must be to carry on some business:
The term „business includes
every trade, occupation or profession [Sec.2(b)]. Though the word „business generally
conveys the idea of numerous transactions, a person may become a partner withanother even in a particular adventure or undertaking (Sec.8). Unless the person joinsfor the purpose of carrying on a business, it will not amount to partnership.
4. The agreement must be to share profits of the business:
The joint carrying on of a business alone is not enough; there must be an agreement to share profits arisingfrom the business. Unless otherwise so agreed, sharing of profits also involves sharingof losses. But whereas the sharing of profits is an essential element of partnership,sharing of losses is not.
A, a trader, owed money to several creditors. He agreed to pay his creditorsout of the profits of his business (run under the creditors supervision) what he owed to