Table of Contents

 Acknowledgement…………………………………………....2
 Declaration……………………………………………………3
 Aims and Objective…………………………………………..4
 Hypothesis…………………………………………………….4
 Research Methodology……………………………………….4
 Introduction……………………………………………………5
1. Definition & nature…………………………………….5
 Duties of an Indemnifier………………………………………8
 Rights of an Indemnifier…………………………………..…..9

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 Acknowledgement
A project is a joint endeavour which is to be accomplished with utmost compassion, diligence
and with support of all. Gratitude is a noble response of one‘s soul to kindness or help
generously rendered by another and its acknowledgement is the duty and joyance. I am
overwhelmed in all humbleness and gratefulness to acknowledge from the bottom of my
heart to all those who have helped me to put these ideas, well above the level of simplicity
and into something concrete effectively and moreover on time.

This project would not have been completed without combined effort of my revered Faculty-
in-charge of the subject Dr. Tanaya Tarai (OSD Academics and Publications) and Md Yusuf
Hayath (Asst. Professor of law) whose support and guidance was the driving force to
successfully complete this project. I express my heartfelt gratitude to them. Thanks are also
due to my parents, family, siblings, my dear friends and all those who helped me in this
project in any way. Last but not the least; I would like to express my sincere gratitude to our
Law teacher for providing us with such a golden opportunity to showcase our talents. It was
truly an endeavour which enabled me to embark on a journey which redefined my
intelligentsia, induced my mind to discover the intricacies involved.

Moreover, thanks to all those who helped me in any way be it words, presence,

Encouragement or blessings...

- NIYATI KISHORE

- 3rd Semester

- B.A. LL.B (Hons.)

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 Declaration
I hereby declare that the work reported in the B.A.LL.B (Hons.) Project entitled ― “Rights
and duties of an indemnifier” submitted at Maharashtra National Law University,
Aurangabad is an authentic record of my work carried out under the supervision of Dr.
Tanaya Tarai. I have not submitted this work elsewhere for any other degree or diploma. I am
fully responsible for the contents of my Project Report.

NIYATI KISHORE

Maharashtra National Law University, Aurangabad

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 Aims and objectives
The aim and objectives of this research project are:

 The project tends to throw light on the topic Indemnity.

 The researcher tends to throw light on various duties and rights of the
indemnifier with respect to various cases.

Hypothesis
This project summarises the topic of ‘Rights and duties of the indemnifier’ and
also discusses the significant prospective of the same. The project will help us
in enhancing our knowledge about the topic ‘Indemnity’ and its significance in
Law of Contract.

Research Methodology
For this study, doctrinal research method was utilised. Various articles, e-
articles, reports and books from library were used extensively in framing all the
data and figures in appropriate form, essential for this study.

The method used in writing this research is primarily analytical.

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 Introduction
Definition & Nature
The term Indemnity literally means “Security against loss”. In a contract of indemnity one
party – i.e. the indemnifier promise to compensate the other party i.e. the indemnified against
the loss suffered by the other.

The English law definition of a contract of indemnity is – “it is a promise to save a person
harmless from the consequences of an act”. Thus it includes within its ambit losses caused
not merely by human agency but also those caused by accident or fire or other natural
calamities.

The definition of a contract of indemnity as laid down in 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.”

In common law Indemnity was established in case of Adamson v. Jarvis1. The plaintiff an
auctioneer sold certain cattle on the instruction of the defendant. It subsequently turned out
that the livestock didn’t belong to the defendant, but to another person, who made the
auctioneer liable and the auctioneer in turn sued the defendant for the loss he had thus
suffered by acting on the defendant’s direction. The court laid down that the plaintiff having
acted on the request of the defendant was entitled to assume that, if, what he did turned out to
be wrongful, he would be identified by the defendant.

As pointed out by Chitty:

The term ‘indemnity’ is used in the law in several different cases. In its widest sense it means
recompense for a loss or liability which one person has incurred, whether the duty to
indemnify comes from an agreement or not. In its widest sense a contract of indemnity
includes all contracts of insurance, in its narrow sense, a contract of indemnity includes all
contracts of insurance, in its narrow sense, a contract of indemnity is used in contrast to a
contract of guarantee..

Under English law, an indemnity is a contract, express or implied to keep a person, who has
entered into or who is about to enter into, a contract or incur any other liability indemnified
against loss, independently i.e. of the question whether a third person makes a default as
1
(1827) 4 Bing 66.

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stated in Halsbury Laws of England. Thus under English law the term indemnity includes
promises to save the promises harmless from loss caused by events or accidents which do not
or may not depend on the conduct of any person or by liability arising from something done
by the promisee at the of the promisor: in the latter case a promise of indemnity may be
inferred as a fact from the nature of transaction.

Under English law promise to indemnity may be express or implied. A leading case on the
point is Dugdale v. Lovering.2 In this case, certain trucks were in possession of the plaintiff.
The defendant as well as a company claimed them. On the demand of delivery of trucks by
the defendants, the plaintiff demanded an indemnity bond, but no reply was received, yet they
delivered the trucks to the defendants. Subsequently, the said company (K. P. Co.) sued the
plaintiff for conversion of property and succeeded in the suit. It was held that the defendants
were liable to indemnify the plaintiff for in the opinion of the Court the demand of indemnity
bond led to the creation of an implied promise. Similarly, in Sheffield Corp v. Barclay3 the
court held:

“Where a person invested with a statutory or common law duty of a ministerial character is
called upon to exercise that duty on the request, direction or demand of another……whether
any default on his own part acts in a manner which is apparently legal but is, in fact illegal
and breach of the duty, and thereby incurs liability to third parties, there is implied by law a
contract by the person making the request to keep indemnified the person having the duty
against any liability which may result from such exercise of the supported duty.”

The scope of Section 124 is narrower than the concept of indemnity under English Law. As
observed by the Bombay High Court in Gajanan Mareshwar v. Madan Mantri4 Section 124
deals with one particular kind of indemnity which arises from a promise made by the
indemnifier to save the indemnified from the loss caused to him by the conduct of
indemnifier himself, or by the conduct of any other person or from loss caused by events or
accidents which do not or may not depend upon the conduct of the indemnifier or any other
person or by reason of liability incurred by something done by the indemnified at the request
of the indemnifier. Thus we see that while in England, nature of loss is not restricted to the
conduct of some person but also includes events and accident not connected with the conduct
of any party, in India it is restricted to the conduct of some person.

2
(1975) 13 LRCP 196.
3
(1905) A.C. 392.
4
AIR 1942 Bom. 302

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It may, however, be noted that Section 124 is not exhaustive and it has been held that the
courts would apply the same principles that the courts in England do.

An agreement to compensate loss due to change of law is not a contract of indemnity as

defined in section 124 of the Contract Act since such loss is neither due to conduct of or
omission nor to the conduct of promisor nor to the conduct of any third party.

As defined by Section 3 of the Marine Insurance Act, 1963, a contract of marine insurance is
an agreement whereby the insurer undertakes to indemnify the assured in the manner and to
the extent thereby agreed against marine losses, that is to say the losses incidental to marine
adventure.

Under Section 4(1) of the Act, a contract of marine insurance may, by its express terms, or by
usage of trade be extended so as to protect the assured against losses on inland waters or on
any land risk which may be incidental thereto.

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 Duties of an Indemnifier
1.Right to recover damages – he is entitled to recover all damages which he might
have been compelled to pay in any suit in respect of any matter covered by the contract.

2. Right to recover costs– He is entitled to recover all costs incidental to the institution
and defending of the suit.

3. Right to recover sums paid under compromise – he is entitled to recover all

amounts which he had paid under the terms of the compromise of such suit. However, the
compensation must not be against the directions of the indemnifier. It must be prudent and
authorized by the indemnifier.

4. Right to sue for specific performance – he is entitled to sue for specific

performance if he has incurred absolute liability and the contract covers such liability. The
promisee in a contract of indemnity, acting within the scope of his authority, is entitled to
recover from the promisor-

(1) 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) all costs which he may be compelled to pay in any such suit if, in bringing or defending it,
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;

(3) All sums which he may have paid under the terms of any compromise of any such suit, if
the compromise was not

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 Rights of the indemnifier

This section deals with the rights of a promisee in a contract of indemnity. There is no
provision in the Contract Act For the rights of a promisor in such a contract. However, the
absence of such a provision does not take away the rights which such a promisor has
according to English law, and which are analogous to the rights of a surety declared in sec.
141. Those rights constitute an essential part of the law of indemnity, and they are of general
application, as they are based on natural equity. 5 Thus, where one person has agreed to
indemnify another, he will, on making good the indemnity, be entitled to succeed to all the
ways and means by which the person indemnified might have protected himself against, or
reimbursed himself for the loss. This principle is based on natural equity, and is of general
application. It is an essential part of the law of indemnity, and the Contract Act does not
impair it. The promisor is not liable, if the promisee suffers damage owing to circumstances
which do not come within the scope of the contract of indemnity.

Conclusion

5
Maharana Shri jasvatsingji Fatesingji v. Secy. Of state for India, (1889) 14 Bom 299

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