CONTRACTS II

WEEK 1: INDEMNITY

PALLAVI GOEL
TOPIC I / WEEK I

CONTRACT OF INDEMNITY
  An indemnity is a promise by one
party to compensate another for the
loss suffered as a consequence of a
specific ''trigger” event.
 Trigger event can be anything: breach
of contract; party's fault or
INTRODUCTION negligence; specific action.
 Indemnity clauses allow parties to
manage the risks attached to a
contract
 The scope and effect depends on the
intention of the parties.
 A contract by which
one party promises to
save the other from
loss caused to him by
SECTION 124, the conduct of the
promisor himself, or by
ICA
the conduct of any
other person, is called
a contract of
indemnity.
 INDEMNITY: Is the promise to make
good the loss

PARTIES IN A INDEMNIFIER - Is the one who

makes promise to make good
CONTRACT OF the loss caused to indemnity
INDEMNITY holder / indemnitee
INDEMNITY HOLDER / INDEMNITEE
- Is the one whose loss is made
good
KEY TERMS
 INDEMNITY: Promise to make good the
loss
 INDEMNIFIER: person making the
promise
 INDEMNITY HOLDER: person to whom this
promise is made / or person whose loss is
being protected

 PROMISOR: person making the promise

 PROMISEE: person to whom promise is
being made
 A manufacturer sells products to
a retailer. The retailer may fear
that, if the products are
defective, it will be exposed to
product liability claims by
EXAMPLE consumers. The retailer will
usually seek an indemnity from
the manufacturer against those
claims, in order to be
compensated if such claims
arise.
 Express indemnity
This is a written agreement to indemnify,
where the terms and conditions by which the
concerned parties must abide are usually
indicated. E.g., insurance indemnity
contracts, construction contracts, agency
contracts

TYPES Implied indemnity

This is an obligation to indemnify that arises,
not from a written agreement, but more from
circumstances or the conduct of parties
involved. E.g., agent-principal business
relationship. When the principal refuses to
accept the goods that the agent supplies
him, the agent can sell them to others;
however, if the agent sustains a loss while
selling, the principal is obligated to pay for it.
 In addition to the implied or
express promise to indemnify,
all the essentials of a valid
contract must also be present.
REQUIREMENTS
LOSS CAUSED BY CONDUCT OF
PROMISEE HIMSELF OR ACT OF
GOD IS NOT COVERED
 Promise between the two parties:
Express or implied
Protection against loss: promise
should be to protect the other
party from loss caused to him
REQUIREMENTS Loss by promisor himself or other
person: Loss may be caused by
promisor himself or by any other
person. It does not include loss
caused by natural reasons which
are beyond human control, fire,
perils of sea etc.
  Indemnities are found in all contracts:
 Assignment of Intellectual Property Rights
 Software Licensing Agreements
 Share Purchase Agreements

INDEMNITIES  Service Agreements

 Employment Agreements
IN  Independent Contractor Agreements

CONTRACTS  Contracts where you are relying on second

party’s expertise
 Sale and Purchase Agreements
 Lease Agreements (Tenancy)
 and many more
 Except for Lessor’s gross negligence or wilful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor’s master or ground
lessor, partners and Lenders, from and against any and all
EXAMPLES OF claims, loss of rents and/or damages, liens, judgments, penalties,
CONTRACT OF attorneys’ and consultants’ fees, expenses and/or liabilities
arising out of, involving, or in connection with, the use and/or
INDEMNITY occupancy of the Premises by Lessee. If any action or proceeding
is brought against Lessor by reason of any of the foregoing
matters, Lessee shall upon notice defend the same at Lessee’s
expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense.
EXAMPLES OF The Consultant agrees to indemnify and hold harmless the
Company of and from any and all claims, demand, losses,
CONTRACT OF causes of action, damage, lawsuits, judgments, including
INDEMNITY reasonable attorneys’ fees and costs, arising out of or
relating to any breach by the Consultant of this Agreement.
EXAMPLES OF Each party agrees to indemnify, defend, and hold harmless
the other party from and against any loss, cost, or damage
CONTRACT OF of any kind (including reasonable outside attorneys’ fees)
INDEMNITY to the extent arising out of its breach of this Agreement,
and/or its negligence or wilful misconduct.
  Loss caused by the receiving party's
deliberate acts: eg in an insurance contract,
the insured should not be indemnified if the
trigger event results from their own intentional
act (for example if the insured burns their own
EXCLUSION OF house intentionally).

INDEMNITY
 Loss caused by the receiving party's own
fraud or crimes: indemnities do not cover the
consequences of the receiving party's own
illegal acts.
Can A ask B to commit robbery and promise
to indemnify B against all losses /
consequences suffered by B for such act?

A corporate financial officer made a mistake

in an important financial report. Is the officer
protected from being sued for this mistake?

A corporate financial officer embezzles

money from the company, is the officer
protected under indemnity provision?

INDEMNITY FOR ILLEGAL ACTIVITIES

 INDEMNITY DAMAGES

indemnity claim may be brought claim can only be brought after the
before breach of contract breach of a contract

Section 124 of the Act puts no Section 73 of the Act puts a duty on
obligation to mitigate losses on the the claimants to mitigate their losses
indemnified party and states that they may not claim
losses which arise due to their failure
of mitigation

Indemnity can be claimed for loss Damages can only be claimed for
arising out of the action of a third loss arising out of the actions of the

INDEMNITY v/s
party to a contract parties upon breach of contract.

relief may be claimed for loss damages can only be claimed

DAMAGES caused by the action of a third

party which may not necessarily
result from the breach of contract
when there is a breach of contract
by either party to a contract

The main principle behind in case of monetary damages,

indemnity is to put a person back award may be awarded more
into the place he was before the than the actual loss occurred or
loss occurred. Hence when a less than the actual loss occurred.
person is indemnified he will never
make a profit or a loss out of it, he
will be restored to his original
position
 Warranties and indemnities are a means of reallocating
risk between sellers and buyers.

A Warranty is a contractual statement from the Seller to

the Buyer as to the condition or state of the good. If a
Buyer can show that a Warranty was untrue when given
and that the breach caused a reduction in the value or
loss, they can claim damages from the Seller. However,
the Buyer is under a duty to mitigate its loss – failure to
do so can reduce the amount of damages they can
INDEMNITY v/s claim from the Seller. The onus is therefore on the buyer
to show breach of contract and quantifiable loss.
WARRANTY An indemnity is a promise to reimburse the buyer in
respect of a particular type of liability, should it arise.
The purpose of an indemnity is to provide guaranteed
compensation to a buyer. An Indemnity places the risk
and responsibility entirely with the Seller and unlike a
Warranty, there is no obligation on the Buyer to prove a
decrease in value, due to the particular liability event
occurring.
The purpose of an indemnity is to provide Rupee for
Rupee compensation.
… WDT warrants that at the time of shipment, goods of WDT's own manufacture will be free from defects in material
and workmanship and will conform to applicable WDT specifications. The foregoing limited warranty shall extend for
a period of one (1) year, unless a different warranty period is set forth in a communication from WDT, which warranty
period shall commence upon shipment of the goods to buyer, and such warranty shall be subject to the limitations of
WDT's warranty policy in effect on the date of the order. No warranty shall apply to any goods that are experimental,
developmental, preproduction, sample, or designated by WDT (on the face thereof or otherwise) as "incomplete" or
"out of specification." The foregoing limited warranty shall not apply and WDT shall have no liability in the event that
buyer returns or otherwise disposes of goods in violation of the RMA process set forth in section 8 below, or, if upon
WDT's examination of the goods, WDT determines that any of WDT's then-current, standard warranty exclusions apply,
which include, but are not limited to: (i) the asserted defect or nonconformity not being present; (ii) the asserted
defect or nonconformity not being capable of being verified because of damage to the goods; or (iii) the asserted
defect or nonconformity being attributable to misuse, neglect, improper installation or assembly, alteration, accident,
unauthorized repair, improper testing, mishandling, or use or operation that is inconsistent with the applicable
published specifications for the goods (including, but not limited to, exceeding specified acceptable temperature
ranges and power on cycles). The foregoing limited warranty extends to buyer only and not to buyer's customers or to
any users of buyer's products. The foregoing limited warranty is WDT's sole warranty. WDT makes no other warranty of
any kind, express or implied. All implied warranties, including the warranties of merchantability and/or fitness for a
particular purpose, are hereby disclaimed by WDT and excluded. Subject to the limitations below, buyer and WDT
expressly agree that buyer's sole and exclusive remedy, and WDT's sole and exclusive liability, for breach of the
foregoing warranty shall be to, at WDT's option and subject to the limitations set forth in §7 below: (i) repair or replace
the goods, or (ii) provide a credit to buyer at the then-current warranty credit value. If WDT elects to repair or replace
goods, WDT shall have a reasonable time, but in no event less than forty-five (45) days, in which to make the repair or
replacement. WDT's foregoing warranties shall extend to repaired or replacement goods but only for the balance of
the applicable period of the original warranty or thirty (30) days from the date of shipment of repaired or
replacement goods, whichever is greater.

LIMITED WARRANTY CLAUSE: SCANDISK

WDT SHALL HAVE NO LIABILITY FOR INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OR ANY FINANCIAL LOSS,
LOST PROFITS OR EXPENSES, ARISING OUT OF OR IN CONNECTION WITH THE PURCHASE, DELIVERY, USE, OR
PERFORMANCE OF THE GOODS OR THE PERFORMANCE OR NONPERFORMANCE BY WDT OF THE TERMS SET FORTH
HEREIN UNDER ANY THEORY OF LIABILITY, WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE, EVEN IF WDT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

WDT'S MAXIMUM LIABILITY AND BUYER'S MAXIMUM RECOVERY FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION
WITH THE PURCHASE, USE OR PERFORMANCE OF THE GOODS SHALL NOT IN THE AGGREGATE EXCEED THE PURCHASE
PRICE OF THE GOODS TO WHICH THE CAUSE OF ACTION RELATES PURCHASED CUMULATIVELY BY BUYER DURING THE
THREE (3) MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE, EXCLUDING TRANSPORTATION AND
FREIGHT CHARGES AND ANY TAXES (LESS THE PRICE OF ANY SUCH GOODS RETAINED BY BUYER HEREUNDER) (THE
"LIABILITY CAP"). THE EXISTENCE OF MORE THAN ONE CLAIM WILL NOT ENLARGE THIS LIMITATION.

LIMITED LIABILITY CLAUSE: SCANDISK

WDT makes no representations that Goods comply with the country of origin requirements of the laws of any
country, including without limitation the Trade Agreements Act of 1979. Any representation made by Buyer on
this issue is made at Buyer's own risk and Buyer shall indemnify WDT for any liability relating to any such
representation by Buyer. If Buyer or a reseller of Goods from Buyer is permitted under this Agreement to provide
such Goods or documentation and/or related items and technology to any third party, including any agency of
the U.S. or any state and local government, Buyer shall include the legend set forth above in any agreement
governing the provision of such items.

LIMITED LIABILITY CLAUSE: SCANDISK

 LAKHMI CHAND VS RELIANCE GENERAL INSURANCE

 In this case, the insurance company had taken the defense

that the vehicle in question was carrying more passengers
than the permitted capacity in terms of the policy at the time
of the accident. The said plea of the insurance company was
rejected.
 The Court held that the mere factum of carrying more
passengers than the permitted seating capacity in the goods
carrying vehicle by the insured does not amount to a
fundamental breach of the terms and conditions of the policy
so as to allow the insurer to eschew its liability towards the
CLAIMING damage caused to the vehicle. This Court in the said case has
held that "it is plain from the terms of the Insurance Policy that
the insured vehicle was entitled to carry six workmen,
DAMAGES excluding the driver".
 In the present case the driver of the vehicle was not
responsible for the accident. Merely by lifting a person or two,
or even three, by the driver or the cleaner of the vehicle,
without the knowledge of the owner, cannot be said to be
such a fundamental breach that the owner should, in all
events, be denied indemnification. The misuse of the vehicle
was somewhat irregular though, but not so fundamental in
nature so as to put an end to the contract, unless some
factors existed which by themselves, had gone to contribute
to the causing of the accident.
 It was held the breach of policy/contract must be so
fundamental in nature, that it brings the contract to an end.
Sophia and Zoya are sisters. Before
death, their grandmother gifted
some pieces of exquisite jewellery to
Zoya. Sophia was jealous and felt
their grandmother has always been
partial. Sophia decides to auction all
the jewellery. She met with Jason an
auctioneer and gives him all the
jewellery to auction. Later, Zoya
found out about the auction and
sued Jason for auctioning her
jewellery. Jason wasn’t aware that
Sophia was not the real owner of the
jewellery. Zoya has decided to sue
Jason for the damages. Can Jason
sue Sophia, if yes, on what basis and
under what circumstances?
Rule is that whenever an act is done
by one person at the request of
another,

which act in itself is not manifestly

illegal/tortious to the knowledge of
the person doing it,

and such act turns out to be injurious

to the rights of a third party,

the person doing it is entitled to

indemnity from him who requested
that it should be done.
DID YOU KNOW?
LIMITATION OF LIABILITY:
In certain cases, the risk of loss
caused by a breach of contract may
exceed the contract price, and the
indemnifying party may not afford an
uncapped indemnity. That is why the
parties will often negotiate to limit
the liability of the indemnifying party,
by capping it to a certain amount or
restricting it to certain
circumstances.
  There is no general rule about when to give
an indemnity. It depends mostly on the
circumstances of the contract (eg if the
contract is a high risk contract), the parties'
willingness to do so and their relative
bargaining positions.
 A party who is in a stronger negotiating
WHEN TO GIVE position is more likely to ask for an indemnity
from the other party, whereas a party in a
AN INDEMNITY weaker position is less likely able to ask for an
indemnity.
 It may be useful to seek an indemnity when:
 One of the parties is likely to suffer a loss from a
commercial transaction;
 The remedies available with a pure damage
claim would not be sufficient to cover the loss
suffered.
  You cannot create tortious liability by
entering into an agreement.
 You are under a legal duty not to
assault another, not to slander
another, not to trespass upon
someone else's land and not because
INDEMNITY you agreed to do so under an
agreement.
AND  Two remedies can be pursued
TORT simultaneously provided there is no
double jeopardy.
Article 20 (2) of the Constitution of
India, which states "No person shall
be prosecuted and punished for
the same offence more than
once.”
A 35-year-old woman arrives in an
emergency room of the hospital
complaining of a headache. The patient
is first examined by a hospital-employed
nurse and then seen by an emergency
room physician’s assistant who is
employed by an outside practice group
(OPG). The patient is diagnosed with a
MIGRANE
migraine and sent home.
The next day, the woman suffers a stroke
resulting in permanent, severe brain
damage. The physician’s assistant, the
supervising physician, the OPG with
whom the physician is associated, the
nurse along with the hospital, are all
named in a lawsuit. The plaintiff Patient suffers brain damage and lawsuit is initiated against:
- OPG Physician Assistant
demands $5 million to settle the case. - OPG Supervising Assistant
- OPG
Can the named parties limit / - Hospital Nurse
- Hospital
completely avoid their liability. If yes,
how?
 Donoghue v.
Stevenson 2.0
Stevenson & Co. the manufacturer of ginger beer entered into a
Supply Agreement with JW Marriott for supply of Stevenson
Ginger Beer (SGB). SGB is sold in a dark glass bottle. Customer
Darlene goes to JW Marriott for a casual dinner and for her
desert orders ice cream with SGB. This bottle, unknown to
anyone, contained the decomposed remains of a snail which
Darlene notices at the end after consuming almost the entire
bottle of SGB.
In consequence partly of what Darlene saw and partly of what
she had consumed, she became very ill and received
emergency treatment. She is clearly very upset and initiates law
suit.

Who will compensate Darlene? What happens if there is an

indemnity agreement b/w Stevenson & Co. and JW Marriot?
  Indian Contract Act uses the term “Contract of
Indemnity” in a very narrow sense. Looking at
the scope of S.124, insurance would not be
covered.
 An insurance company indemnifies a property
owner from losses or damage to that property.
INDEMNITY The business owner basically transfers the risk of
having to pay for negligence to the insurance
AND company. Going by this, it can be argued
insurance is covered under contingent
INSURANCE contracts.
 Business owners may buy indemnity insurance
for professional liability. Indemnity
insurance can protect freelance writers.
 The Law Commission of India recommended
that this definition be further expanded.
However, no action has been taken yet.
  It is a contract to pay a certain sum of
money on the death of a person (or on
maturity) in consideration of the
payment of premiums.
 Life insurance is not a contract of

LIFE indemnity because the insurer does

not undertake to indemnify the

INSURANCE assured for any loss on maturity or

death of the assured but promises to
pay sum assured in that event.
 There is no question of indemnification
in such a case, for the loss resulting
from death, cannot be estimated in
money.
Carol has a homeowner's insurance
policy that includes personal liability
insurance. As part of the language of
the liability section, the insurance
company agrees to indemnify Carol
from liability if someone is injured on her
property. Raj an amazon delivery guy
enters the premises to drop off a
package. He falls on Carol’s front steps.
Will the insurance company protect
Carol from medical bills and other losses
in this situation?
  Help you protect against troubles you
could run into with contracting party and
third parties as a result of your relationship
with the contracting party.
 E.g., If your client is given the right to use
intellectual property, then your client
would need protection against any
liability that might arise if the other party
gives the client infringing material.
WHY DO WE NEED  If your client engages a PR company,
INDEMNITYCLAUSES your client needs protection against any
damages you may incur as a result of the
company’s misrepresenting your client
and his/her brand.
 If the other party is doing work in your
client’s store, and their work causes an
injury to one of the client’s guests, the
client would want that contracting party
to bear the weight of liability resulting
from the injury.
  The promisee / IH in a contract of indemnity,
acting within the scope of his authority, is
entitled to recover from the promisor / Ier —
 (1) all damages which he may be *compelled*
to pay in any suit in respect of any matter to
S.125, ICA: which the promise to indemnify applies;
 (2) all costs which he may be compelled to pay
RIGHTS OF in any such suit if, in bringing or defending it, he
did not contravene the orders of the promisor,
INDEMNITY and acted as it would have been prudent for
him to act in the absence of any contract of
HOLDER WHEN indemnity, or if the promisor authorized him to
bring or defend the suit;

SUED  (3) all sums which he may have paid under the
terms of any compromise of any such suit, if the
compromise was not contrary to the orders of
the promisor, and was one which it would have
been prudent for the promisee to make in the
absence of any contract of indemnity, or if the
promisor authorized him to compromise the suit.
  S. 125 of the Contracts Act: The promisee (IH) in a
contract of indemnity, acting within the scope of his
authority, is entitled to recover from the promisor (ier)
-
 (1) all damages in respect of any suit or matter;
 (2) all costs if, in bringing or defending such suit,
S.125, ICA: PROVIDED
 (1) the indemnifier allows the indemnitee (IH) to
RIGHTS OF bring and defend the suit;
 (2) indemnitee (IH) did not violate the orders of

INDEMNITY
the indemnifier; and
 (3) indemnitee (IH) acted as it would have been
prudent for him to act in the absence of any
HOLDER WHEN contract of indemnity.;
 (3) all sums which he may have been paid under the
SUED terms of any compromise of any such suit, PROVIDED
 (1) that the indemnifier authorised such
compromise;
 (2) the compromise was not contrary to the orders
of the indemnifier, and
 (3) indemnitee acted prudently as it would have
acted in absence of any contract of indemnity.
  For indemnification on costs and sums: this
section contemplates that at each stage, the
indemnity holder applied for authority or
orders of the promisor. In the absence of such
authority or orders from the promisor, the
indemnity holder has to act reasonably/as a
prudent man.
 The words “compelled to pay” need not
mean ‘already paid.’ Indemnifier’s liability
S.125, ICA: arises as soon as the indemnity holder’s
liability becomes absolute.
REMEMBER  Costs mean reasonably incurred costs in
resisting or reducing or ascertaining the claim
may be recovered.
 It is not necessary for the indemnity holder to
give notice of court proceedings to the
indemnifier. However, it is advisable to do so
as this puts indemnity holder in a better
position to defend and accordingly decide if
the indemnity holder wishes to settle or
continue with the legal action.
 Vikas, a farmer wants to sell a particular property to Bhola
(farmer). Bhola is sceptical. Sensing Bhola’s reluctance, Vikas
offers to enter into a ‘contract of indemnity’ with Bhola,
according to which Vikas will bear “all the costs of litigation if
the title to the said property is ever questioned.” Bhola feels he
can trust Vikas and agrees to buy the land for Rs. 50 lakh. A
year later, Sohan lal, another farmer sues Bhola over the title of
the same property. Bhola hires J Sagar Associates to defend this
suit. Bhola seeks to recover Rs. 30 lakh that he paid as fees to
the lawyers of the firm from Vikas. Can Bhola do so?

INDEMNIFIER AND INDEMNITEE RIGHTS

 ORIGINAL RULE:
• Indemnity becomes payable only after the
indemnity holder has suffered actual loss.
NEW RULE:
INDEMNIFIER’S • Indemnity doesn’t require repayment of payment.
Indemnity requires that the party to be
/ PROMISOR’S indemnified shall never be called upon to pay.
Richardson Re, Ex Party the Governors of St.
LIABILITY Thomas’s Hospital
• Indemnity might be worth very little if indemnified
RULE could not enforce indemnity till he actually paid
the loss. Gajanan Moreshwar v. Moreshwas
Madan
• If liability has become absolute then indemnifier
should either payoff the claim or pay in court
sufficient amount which would constitute a fund
for paying off the claim whenever it will be made.
Gajanan Moreshwar v. Moreshwas Madan
  Indemnity and Damages are two closely related
concepts
 Indemnity – Definition: S.124; S.125 provides remedy to
the promisee in a contract of indemnity acting within
the scope of its authority.
 Damages – S.74: When a contract has been broken, if
a sum is named in the contract as the amount to be
paid in case of such breach, or if the contract contains
any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not

INDEMNITY v.
actual damage or loss is proved to have been caused
thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the

DAMAGES
amount so named or, as the case may be, the penalty
stipulated for.
 S.73: where a contract has been broken, the party who
suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for
any loss or damage caused to him thereby, which
naturally arose in the usual course of things from such
breach, or which the parties knew, when they made
the contract, to be likely to result from the breach of it.
Also, compensation is not to be given for any remote
and indirect loss or damage sustained by reason of the
breach.
 • An indemnity claim may be brought before breach of contract,
whereas damages claim can only be brought after the breach of a
contract.
• Section 73 of the Act puts a duty on the claimants to mitigate their
losses and states that they may not claim losses which arose due to
their failure of mitigation, whereas Section 124 of the Act puts no such
obligation on the indemnified party.

INDEMNITY v.
• Indemnity can be claimed for loss arising out of the action of a third
party to a contract, whereas damages can only be claimed for loss
arising out of the actions of the parties upon breach of contract.

DAMAGES • Under an indemnity clause, relief may be claimed for loss caused by
the action of a third party which may not necessarily result from the
breach of contract, whereas damages can only be claimed when there
is a breach of contract by either party to a contract.
• The main principle behind indemnity is to put a person back into the
place he was before the loss occurred. Hence when a person is
indemnified he will never make a profit or a loss out of it, he will be
restored to his original position, whereas in case of monetary
damages, award may be awarded more than the actual loss occurred
or less than the actual loss occurred.
  Indemnity: Promise to save promisee
harmless from loss from events or
accidents which do not or may not
depend on the conduct of any person

INDEMNITY v.  Guarantee: an undertaking to answer

for the payment or performance of
GUARANTEE another person's debt/obligation in the
event of a default by the person
primarily responsible for it.
 Difference: Number of Parties, Number
of Contracts, Liability, Recovery, etc.
 TEST YOURSELF

“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”.
Explain.

Russel and Peters are professional food bloggers. They often travel to exotic and unique restaurants to
try unique dishes. Both friends during their trip to Tampa, Florida decide to dine at a Michelin Star
Vietnamese French cuisine restaurant “Restaurant BD.” Russel urges Peters to try the “Ackee Alfa-Alfa
cheese salad.” Ackee a popular Jamaican fruit if picked unripe can cause vomiting, hypoglycin or
even death. Peters is hesitant in trying the dish; however, Russel promises Peters to compensate him
against any hospital medical bill in case of Ackee poisoning. Peters tries the dish and falls severely ill.
He was hospitalised for a week and nearly escapes death. Peters wishes to be compensated by
Russel. Is Russel liable?
Sanjay is an engineer who has developed a robot to do household chores. Sanjay is
looking to test his robots before he can launch the robots in market. While a lot of
people are showing interest in the robot Sanjay is skeptical of loosing his intellectual
property rights. Sanjay’s lawyer suggests he can use a Confidentiality and Non-
Disclosure Agreement, which will put an obligation on the signor of the agreement to
maintain secrecy and also make such person(s) liable to indemnify incase of loss,
breach or non-return of the goods/products. Sanjay entered into a contract with the
company testers.com, to help him test run the robots while maintaining the secrecy.
Sanjay and the company entered into a Confidentiality and Non-Disclosure
Agreement where it was agreed that the company will help Sanjay find prospective
houses to test run the robot. The company also agreed to indemnify Sanjay for any loss
which Sanjay might incur during the term of the agreement. Sanjay and Company
shortlisted 10 such households and the company entered into a Confidentiality and
Non-Disclosure Agreement with each of these users along-with indemnification

TEST
agreement. The company promised to indemnify the users against any and all losses
which users might incur in-respect of the subject matter of the contract. Secrecy is the
essence of both contracts and the same was breached when one of the users,
Seema, decided to take the robot out for shopping and lend it out for rent. Seema
met a guy, Ram at the grocery store. Ram was a scientist, he without revealing his true
identity to Seema convinced her to lend him the robot for Rs. 2000 per day. Seema
tempted by the offer lend the robot to Ram, for a week. After a week when the robot
YOURSELF
was returned to Seema it was quite evident that the robot had been opened and re-
assembled. There seemed to be some glitches in its functioning ever since it returned
from Ram’s place. Thankfully, Sanjay had used a specialised mechanism which
blocked other users from accessing the robot. Ram could disassemble the robot but
couldn’t access anything and no information was hacked or lost. Seema filed a
complaint to the company for robot not working and when Sanjay visited to check the
robot he realised that someone tried to access the robot. After a series of questions
and cold interrogation Seema confessed what she had done. Sanjay is very upset and
wishes to sue her for damages and breach. Seema still feels that the robot is defective
and decides to contest the case despite the company’s clear instructions to her to
settle the case. Sanjay sues Seema for damages worth Rs. 1 crore. The Court decrees
the suit in favour of Sanjay and orders Seema to pay Rs. 1 crore as damages along
with Rs. 1 lakh as costs. Decide upon the liability of testers.com.
NEXT WEEK: GUARANTEE
Pallavi Goel pgoel@jgu.edu.in 9971490097