CONTRACTS II PALLAVI GOEL

WEEK 1: INDEMNITY
 WHAT IS COMMON IN EACH OF THESE SCENARIOS?
To,
The President of India In consideration of the Union of India has called me / my
A sign-up documentation for 24- ward (Name etc) ____________, (a minor of whom I am the legal/ natural
guardian to appear before the selection board for conducting selection tests for a
hour gyms that often will not grant for commission in the Army/ Navy/ Air Force. I undertake and agree that
have staff working while neither I nor my heirs nor my executors nor administrators will make any claim
gymgoers are on the gym floor – against the UOI or against any officer or airman of the IAF or against any person in
the service of UOI in respect of any loss or injury to me/my ward including injury
“use of the gym equipment is at resulting in my/his death which I/he may suffer as a result of or in connection with
your own risk and XYZ gym takes any of the tests given to me/him at the Service Selection Board and I understand
no responsibility for any injury or and agree that no compensation will be paid by the UOI in respect of any such loss
or injury or death and I further agree so as to bind myself, my heirs, my executors
death caused by its use.” and administrators to indemnify the UOI, any officer or airman of the IAF and any
person in the service of the UOI against any claim which may be made by any third
party against the UOI, or any officer or airman or person in the service of the UOI,
arising out of any act or default on the part of myself/minor or in connection with
such tests before Service Selection Board.
Dated, the ____ day of _20**.

Signature
 SCENARIO
‘A’ an auctioneer sold some rare art-work to ‘B at the
instructions of his client ‘C.’ Turns out C is not the true
owner of paintings rather fraudulently procured it
from X, the true owner.
Examine:
Rights of B, the buyer and X, the true owner?
Rights and Liabilities of A, the auctioneer & C, the
client?
Who is the owner of the art-work?
Which party shall bear the cost/loss?
 SCENARIO
Let's Get Married Pvt. Ltd. (LGM) is a prestigious
marriage event management company that caters to
high-profile clients in India. Petals and Roses, a
burgeoning florist brand, seeks to collaborate with
LGM for their floral arrangements. One of LGM’s
longstanding partners, XYZ, vouches for the
performance of Petals and Roses. XYZ assures LGM
that if Petals and Roses fail to deliver the promised
floral arrangements, XYZ will step in to fulfill the
requirement.
Examine:
The nature of this legal relationship.
In practice, an indemnity clause offers
compensation to you if you suffer a loss or
future loss, and a guarantee offers you
either compensation or fulfillment of a
contract as a guarantor will take on
responsibility if the other party is unable
to perform.
 INDEMNITY: Simply put, it’s a Promise to make good
the loss
INDEMNIFIER: is the Person making the Promise/
Promisor
BASIC INDEMNITY HOLDER/IMDEMNITEE/INDEMNIFIED: is

CONCEPTS the Person to whom this promise is made / or the

person whose loss is being protected

PROMISOR: person making the promise

PROMISEE: person to whom promise is being made
 The Indian Contract Act, 1872
Chapter-VIII Of Indemnity and Guarantee
INDEMNIFIER
Section 124: “Contract of indemnity” defined.

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
S. 124, INDIAN “contract of indemnity”.

CONTRACT ACT INDEMNITY

HOLDER
Illustration
A contracts to indemnify B against the consequences of any proceedings
which C may take against B in respect of a certain sum of Rs. 20,000/-
This is a contract of indemnity.
A = Indemnifier / Promisor himself
B = Indemnity Holder
C = any other person
PURPOSE OF
INDEMNITY
 EXAMPLES:
1. A contracts to indemnify B against the consequences of any
proceedings that C may take against B in respect of a certain sum
of 200 rupees. This is a contract of indemnity.
2. A manufacturer sells products to a retailer. The retailer may fear
that, if the products are defective, it will be exposed to product
S. 124: liability claims by consumers. The retailer will usually seek an
indemnity from the manufacturer against those claims, to be

PRACTICAL 3.
compensated if such claims arise.
Most Insurances: e.g., a truck under indemnity insurance for Rs. 2
APPLICATION lakhs, if it is stolen with no chance of recovery, then indemnity
becomes payable.
4. A loses his share certificate and requests the company to issue new
ones, generally the company issuing such new certificates will
request for an indemnity, indemnifying the company of and against
all losses in case A’s representations turn out to be false.
5. Indemnities in lease contracts, when you purchase or use CDs, pen
drives, etc.
 BY THE PROMISOR
HIMSELF BY ANY OTHER
PERSON

Must be caused by
some human agency
S. 124,
LOSSINDIAN
CONTRACT ACT EXCLUDES: loss b/c
accidents like fire or perils
of the sea.

w.r.t S.124: Contracts

of Insurance will fall
u/Contingent Contracts
 E.g., written
express promise to
indemnify –
EXPRESS through bonds or
contracts

S. 124, INDIAN INDEMNITY

CONTRACT ACT E.g., Implied in the

IMPLIED legal relationship –
principle agent
relation, principal
debtor and Guarantor
relationship
 An implied contract of indemnity is:

 a legally binding obligation that

IMPLIED  arises from the conduct of parties involved in a

contract, rather than from a written agreement
CONTRACTS OF
INDEMNITY  E.g., in an agent-principal relationship, the agent may
be impliedly obligated to indemnify the principal
and vice-versa.
 A vendor transfers property to
a vendee, with the direction to
the vendee to pay off a 3rd
person. Is it a contract of
indemnity?

An agreement between a
seller and purchaser whereby
the consideration for sale was
to be paid by the purchaser to
a creditor of the vendor.
INDEMNITY & LOSS
 ▪Almost all insurance contracts other than life insurance
and personal accident insurance are considered
contracts of indemnity.
▪A contract of insurance is very similar to an indemnity
contract. Here, the insurer promises to compensate the
insured for his losses. In return, he receives
INSURANCE consideration in the form of a premium.

CONTRACTS ▪ If the indemnity holder incurred liability and the

liability has become absolute – there is a duty to
indemnity.
▪Gajanan Moreshwar v Moreshwar Madan: Every
contract of insurance, other than life insurance, is a
contract of indemnity. The definition is restricted to
cases where loss has been caused by some human
agency.
 Indemnity Insurance
An agreement by which one party
promises to save the other from loss
Insurance may be thought of as a
caused to him by the conduct of the
periodic payment made to protect
promisor himself or by the lead of
against any losses incurred.
someone else is classified as a
“contract of indemnity”.

INDEMNITY AND Section 124 of ICA: indemnity.

Section 31 of ICA: insurance under a
contingent contract.

INSURANCE The word indemnity has been

derived from the term “indemnis”
The word “insurance” has been derived
from the term “enseurance” which
which means unhurt, free from loss. means assurance, a guarantee.
Indemnification can exist without Insurance cannot exist without
insurance. indemnification.
In an indemnity contract, the In an insurance policy, regular premium
affected party will get compensation payments are made to guard against
after the loss has occurred. losses
LIFE INSURANCE?
DID YOU KNOW?
When the promisor incurs an
absolute obligation,
He can sue for its enforcement
without the occurrence of an
actual loss.
 New India Assurance Company Ltd. Vs Kusumanchi
Kameshwra Rao & Others
A Contract of indemnity is a direct engagement between
two parties thereby one promises to save the other harm.
It does not deal with cases where the indemnity arises from
S. 124; loss caused by events or accidents that do not or may not
depend on the conduct of the indemnifier or any other
INDEMNITY person.

Punjab National Bank v Vikram Cotton Mills

Under a contract of indemnity, the liability of the promisor
arises from loss caused to the promisee by the conduct of
the promisor himself or by the conduct of another person.
 SECRETARY OF STATE V. BANK OF INDIA
A broker in possession of a government promissory note
endorsed it to a bank with a forged endorsement. The
bank acting in good faith applied for and got a renewed
promissory note from the Public Debt Office. Meanwhile,
the true owner sued the Secretary of State for conversion
S. 124; who in turn sued the bank on an implied indemnity.

INDEMNITY Held:
It is a general principle of law when an act is done by
one person at the request of another which act is not in
itself manifestly tortious to the knowledge of the person
doing it, and such act turns to be injurious to the rights of
a third person, the person doing it is entitled to an
indemnity from him who requested that it should be done
 1. There must be a loss
2. The loss must be caused either by the promisor or by
any other person. [It has to be a person]

S. 124; 3. Indemnifier is liable only for the loss

INDEMNITY: Thus, indemnity contracts are contingent in nature and are

enforceable only when the loss occurs
ESSENTIAL
Types:
ELEMENTS Express indemnity: written/oral
Implied indemnity: arises from circumstances or the conduct
of parties involved. E.g., agent-principal business
relationship
 A contractor promises to build a
house. There is an indemnity clause
added to the construction
agreement stating that the
contractor will indemnify the owners
for any losses on account of
construction delay. The house owners
fail to provide the necessary
materials on time, causing delays
and extra costs. The house owners
sued the contractor for the losses
caused on account of the delay.
INDEMNITY FOR LOSS Decide.
 1. The Consultant agrees to indemnify and hold harmless the Company of
and from any and all claims, demand, losses, causes of action, damage,
lawsuits, judgments, including reasonable attorneys’ fees and costs,
arising out of or relating to any breach by the Consultant of this
Agreement.
2. Each party agrees to indemnify, defend, and hold harmless the other
party from and against any loss, cost, or damage of any kind (including
reasonable outside attorneys’ fees) to the extent arising out of its breach

HOW DOES IT 3.
of this Agreement, and/or its negligence or wilful misconduct.
Except for Lessor’s gross negligence or wilful misconduct, Lessee shall
LOOK LIKE? 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 claims, loss of rents and/or damages, liens,
judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
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.
 DID YOU KNOW?
LIMITATION OF LIABILITY: CAP IT

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.
 INDIAN LAW:

➢S.124 is narrow in scope.

➢Requires a promise to save from loss by self or another
person.
➢Most importantly, human involvement is essential.
INDEMNITY: ENGLISH LAW:
INDIAN LAW ➢ English indemnity law is broader, often including anticipatory
VS losses and a wider range of covered events.

ENGLISH LAW ➢Under Indian law, the indemnity-holder typically claims

losses after they occur. Under English law, the indemnified
party can often claim in anticipation of a loss.
➢Adamson v. Jarvis (1827): The Court held that when P acts at
the request of D, P is entitled to assume that if what P does
turns out to be wrongful, P will be indemnified by D.
 oCan A ask B to commit robbery and promise to
indemnify B against all losses / consequences suffered
by B for such act?

INDEMNITY FOR oA corporate financial officer made a mistake in an

COMMITTING important financial report. Is the officer protected from
being sued for this mistake?
CRIME
oA corporate financial officer embezzles money from the
company, is the officer protected under indemnity
provision?
 LAKSHMI CHAND vs RELIANCE GENERAL INSURANCE
o The insurance company raised a defense that the vehicle in
question was carrying more passengers than the permitted
capacity at the time of the accident.

PROMISE TO oThe Court, while rejecting the plea, held that the mere factum
of carrying more passengers than the permitted seating
INDEMNIFY – 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 avoid its liability
EXCEPTIONS towards the damage caused to the vehicle. The Policy is
entitled to carry six workmen, excluding the driver.
INDEMNITY oHere, the driver of the vehicle was not responsible for the
CLAIMS accident. Merely by lifting one, two, or even three, persons by
the driver or the cleaner, without the knowledge of the owner,
cannot be said to be such a fundamental breach that the
(JUST FOR YOUR INFORMATION) owner should, in all events, be denied indemnification, 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.
 Compared to other statutory remedies for breach of
contract, having an indemnity clause has its
advantages. For example, unlike damages which can
INDEMNITY only be claimed when loss has occurred, case laws
have established that indemnity may be claimed from
VS. the indemnitor even when loss has not happened but
when there is accrual of liability and such liability has
STATUTORY become absolute. In addition, having the ability to
REMEDIES FOR invoke an indemnity clause in the case of a
contractual breach simplifies the dispute resolution
BREACH process. This is because the party relying on the
indemnity does not have to establish the elements of
its claim to the extent it would otherwise be required
for claiming damages for the same breach.
 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 lawsuit. The company and Marriot
STEVENSON GINGER BEER signed the following indemnity provision.
Decide.
 “Supplier shall indemnify, defend and hold
harmless Buyer and its parent companies and
each of their subsidiaries and affiliates, and
each of their respective officers, directors,
employees, agents, representatives and
shareholders, predecessors and successors, from
and against any and all claims, demands,
causes of action, damages, losses, liabilities,
judgments, costs, fees and expenses (including,
without limitation, reasonable costs and
expenses of investigation and settlement and
reasonable attorneys’ fees and expenses)
(collectively, “Losses”), to the extent arising out
of or relating to any breach by Supplier of its
representations, warranties, covenants or
obligations set forth in this Agreement. Such
indemnification obligations shall survive the
STEVENSON GINGER BEER expiration or termination of this Agreement for
any reason.”
 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.
 ZOYA’S GRANDMA JEWELLERY
CASE
Sophia and Zoya are sisters. Sophia had debts that she
was unable to pay off. After the grandmother’s death,
Sophia decided to take her jewelry and sell it to Ravi.
She owed him Rs. 50 Lacs. Sophia told Ravi that she
owned the jewelry and had the right to sell it. However,
the grandmother had bequeathed all her movable and
immovable property to Zoya. Zoya had filed a police
complaint for missing jewelry. Ravi was caught by the
police, wearing and trying to sell the jewelry. Police
charged Ravi with stealing.
Discuss the rights and liabilities of the parties.
 John books a package holiday
through a travel agent, which
includes a hotel stay. As part of
his package holiday contract,
there’s an indemnity clause
stating if John causes any
damage to his hotel room, he’s
required to compensate the
hotel. There’s also a guarantee in
the contract signed by the travel
agent that says if John is unable
to indemnify the hotel for the
damage, the travel agent
promises to compensate the hotel
on John’s behalf.
JOHN’S HOLIDAY PACKAGE What is the right of the hotel and
the liability of each party?
 The Indian Contract Act, 1872
Chapter-VIII Of Indemnity and Guarantee

Section 125: Rights of indemnity-holder when sued.

125. The promisee in a contract of indemnity, acting within the scope of

his authority, is entitled to recover from the promisor—

S. 125, INDIAN (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;
CONTRACT ACT (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 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;

S.125, ICA: (2) all costs if, in bringing or defending such suit,
PROVIDED
RIGHTS OF  (1) the indemnifier allows the indemnitee (IH) to bring and defend the
suit;

INDEMNITY  (2) indemnitee (IH) did not violate the orders of the indemnifier; and
 (3) indemnitee (IH) acted as it would have been prudent for him to act

HOLDER WHEN in the absence of any 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.
 The Promisee is entitled to recover:

RIGHTS OF ▪ the damages which he has been compelled to pay in the suit
in respect of the matter for which he has been indemnified,
INDEMNITY
HOLDER ▪the costs which he was compelled to pay in the suit, and
WHEN SUED
▪the amounts paid by him under the terms of any compromise.
 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
S.125, ICA: man.
The words “compelled to pay” need not mean ‘already
REMEMBER paid.’ Indemnifier’s liability arises as soon as the
indemnity holder’s liability becomes absolute.
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.
 Mainly of 4 types:
Special damages: compensate you for actual out-of-pocket
expenses: such as lost wages or money spent on therapy.
General damages compensate you for a wrong done to you that
can’t be calculated precisely. They can be anything from
S.125, ICA: compensation for “pain and suffering” to money paid to you for
loss of reputation due to defamation. It is compensation for non-
DAMAGES monetary damages.
Aggravated damages are paid when the other party behaves
particularly badly towards you. For example, you can break
your arm in a car crash or someone angry with you could just hit
it with an iron rod. In a car crash, that’s unfortunate, but not an
aggravating circumstance. However, when someone deliberately
injures you, you claim aggravated damages.
Non-compensatory damages/punitive damages: The idea is to
punish the other party. Also called exemplary damages.
Awarded by a court to punish for harmful or outrageous conduct.
They are intended to deter litigants from similar behavior in the
future and to signal to the public that the court will not tolerate
such conduct.
 A court award of costs is a sum of money that a court orders one party to pay
another party in a lawsuit to compensate for the expenses of litigation.
The court usually makes this award at the end of a civil trial or interlocutory hearing,
and it specifies which party will pay the costs and how much they will be.
The general rule is that the costs are paid by the unsuccessful party to the successful
party; may include fees, expenses, and remuneration. Provided that they are not

S.125, ICA: unreasonable in nature.

COSTS General Costs are dealt with under Section 35 of the CPC. The main objective of
this section is to award costs to the successful party to a suit against the expenses he
might have incurred for prosecuting or defending the suit.

Compensatory Costs: Section 35A of CPC. The objective of this section is to deter the
false and vexatious cases being filed by the litigants by imposing costs to
compensate the other party who has suffered from such false litigation.

Costs for causing delay are dealt with under Section 35B of CPC.
Miscellaneous Costs are provided under Order XXA of the CPC. Under this Order,
specific provisions are made giving power to the court to grant costs with respect to
miscellaneous expenses like serving notices, typing and printing charges, production
of witnesses etc.
INDEMNIFIER AND
INDEMNITEE RIGHTS
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?
 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.
PROMISOR’S Indemnity requires that the party to be indemnified
shall never be called upon to pay. Richardson Re, Ex
LIABILITY Party the Governors of St. 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 the indemnifier
should either pay off the claim or pay in court a
sufficient amount which would constitute a fund for
paying off the claim whenever it is made. Gajanan
Moreshwar v. Moreshwas Madan
 In Durley House v Firmdale Hotels, while
considering whether the requirement of
prior payment was a condition precedent
to the right to be indemnified, the judge
explained that one view is that where the
PRACTICE POINTS clause requires the indemnifying party to
"hold harmless" the indemnified party, the
true obligation of the indemnifying party
is to prevent the indemnified party from
sustaining any loss or expense in the first
place, rather than merely to reimburse the
indemnified party only once the latter has
paid or lost.
 “… AND HOLD HARMLESS”

Without the words "and hold harmless", an indemnity

may not protect an indemnified party against claims
by the indemnifying party. However, in most
circumstances, an indemnifying party is likely to
resist the inclusion of these words as it would not
want to rule out the possibility of bringing an action
against the indemnified party where that party is
PRACTICE POINTS partly responsible for the loss.

If party A agrees to indemnify and hold harmless

party B in respect of any loss or damage suffered
by party B for the breach of a third party’s
intellectual property rights, party A must indemnify
party B for those losses, but, in addition to that,
party A cannot bring an action against party B. If
party A thinks that party B had caused or
contributed to the loss suffered (through negligence
or contractual breach), Party B would have a
defence to party A’s claim because its liability to
party A is excluded by the words "hold harmless".
 “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
TEST YOURSELF 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. Sanjay’s lawyer
suggests he can use a NDA. Sanjay entered into a contract with the company
Testers.Com, to help him test run the product. Sanjay and the Company entered into a
NDA, where Company agreed to help Sanjay find prospective clients to test run the
product. The Company also agreed to indemnify Sanjay for any loss which Sanjay
might incur for breach of NDA by the Company or Clients. 10 such households and
the company entered into a Confidentiality and Non-Disclosure Agreement with each
of these users along-with indemnification 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

TEST YOURSELF 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 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.
 o In a guarantee, there is an existing debt/duty that the
surety guarantees to discharge. The liability in
indemnity is contingent and may not arise at all.

o An indemnifier might act without the debtor’s behest,

INDEMNITY & while a surety always waits for the principal debtor’s
GUARANTEE request.

o The liability of an indemnifier towards the indemnity

holder is primary. Whereas, in guarantee, the surety’s
liability is secondary. This is because the primary
liability lies on the principal debtor himself.
 oA promises to deliver certain goods to B for Rs. 2,000
every month. C comes in and promises to indemnify B’s
INDEMNITY & losses if A fails to so deliver the goods.

GUARANTEE oA promises to deliver certain goods to B for Rs. 2,000

every month. C comes in and promises B to deliver the
goods incase A fails to do so.