Business Law: Dinesh R

INDEMNITY
CONTRACT
WITH
EXCEPTIONS
BUSINESS LAW
Dinesh R
1527910
MBA-L
Introduction:
A Contract whereby 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. . Indemnity, in simple words, is protection against future loss.
The person who promises to save the other is called the Indemnitor or Indemnifier and
the person who is compensated is the Indemnitee, Indemnified or the indemnityholder. It is a contingent contract by nature. It may be express or implied.
CASE
SOURCE
FACT
JUDGEMENT
Injunction
against
the
Bank
of
Alexandria
against
the
foreign buyer
restraining
them
from
receiving any
money.
http://indiankano
on.org/docfragme
nt/588000/?
formInput=cases
%20on
%20indemnity
It would not be correct to

say that so long as that
order stands, the Bank of
Alexandria would be under
an
obligation
to
pay
without contestation the
amount agreed to be paid
under a letter of credit to
the foreign buyer. The
unilateral assertion of the
Bank of Alexandria that
under the Egyptian Law
they
were
under
an
obligation to pay without
contestation would not be
decisive of the matter.
Osman Jamal http://indiankano

And Sons Ltd. on.org/doc/11437
vs
Gopal 65/
Purshottam on
19 July, 1928
In this case the plaintif

company is in liquidation
and is represented by the
Official Liquidator. By a
contract made in July 1925
it was agreed inter alia that
the
plaintif
company
should act as commission
agents for the defendant
firm in the purchase and
sale
of
hessian
and
gunnies and that the
defendant
firm
would
indemnify
the
plaintif
company against all losses
in
respect
of
such
transactions.
Pursuant
thereto, on or about the
2nd December 1925, the
plaintif
company
purchased certain hessian
from
one
Maliram
Ramjidas,
which
the
defendant firm failed to
pay for or take delivery of,
with the result that the
goods were resold by the
vendor at less than the
contract price and he has
claimed the balance from
As long as order of this

Court stands restraining
the Bank of Alexandria
from
making
any
payment or the foreign
buyer from receiving
any
payment,
any
payment to be made or
attempted to be made
would be in violation of
the order of A. N. Sen,
J., dated the 28th
November
1967
as
mentioned hereinbefore
and
that
order
is
binding on the Bank of
Alexandria until it is set
aside
or
lawfully
declared not binding.
The
defendants
contend, firstly, that
the
plaintifs
have
never become liable to
the vendor, because
they acted only as
agents for disclosed
principals, namely, the
defendant firm, and
therefore no right to
indemnity has arisen.
This argument seems
to
rest
upon
a
misapprehension
of
fact.
The
plaintifs
purchased through a
broker as principals and
not as agents which
becomes evident upon
perusal of the bought
and
sold
notes.
Consequently
they
were liable to the
vendor for breach of
the contract of sale.
Chand
Bibi http://indiankano
And Ors. vs on.org/doc/20853
Santoshkumar /
Pal
on
18
January, 1933
Gajanan
http://indiankano
Moreshwar
on.org/doc/13610
Parelkar
vs 99/
Moreshwar
Madan Mantri
on 1 April,
1942
the
plaintif
company.
Consequently the plaintifs
now seek to recover this
sum from the defendants
under
the
aforesaid
indemnity, in addition to a
further
sum
for
commission
which
otherwise they would have
received.
On 29th December 1920 a
Bengali kabala or deed of
sale to Akhilchandra Pal
was executed by Chand
Bibi, Alifjan Bibi, Sheikh
Badruddin
and
Mahabunnessa Bibi, which
stated inter alia as follows:
That,
in
1892,
one
Nawabjan executed a deed
of wakf in respect of
certain properties; that, on
1st May 1914, Alifjan Bibi
as mutawalli mortgaged
the properties, including
the scheduled properties,
to
Haripada
Ray
and
subsequently sold some of
them to pay of part of the
mortgage debt; that, in
1919, Badruddin, one of
the heirs of Nawabjan, filed
a suit for partition of the
whole property left by
Nawabjan including the
wakf property, which suit
was decreed on 11th June,
that We have all agreed to
repay the debt of the said
Haripada Ray.
It seems that in the year
1934 the plaintif entered
into an agreement with the
Municipal Corporation for
the City of Bombay for the
lease of a plot of land
bearing No. 226A of the
Dadar Matunga Estate for a
term
of
999
years.
Thereupon the defendant
entered into possession of
The
defendant
be
ordered to procure from
the
mortgagee
a
release of the plaintif
from all liability under
the deed of mortgage
and further charge and
also that the defendant
may be ordered to pay
into Court the sum
required to pay of the
the plot of land and

commenced to erect a
building
thereon.
The
materials
for
the
construction of the building
were supplied by one
Keshavdas Mohandas, and
the
amount
therefor
exceeded Rs. 5,000.
Nirmaljit
Singh Hoon vs
The State Of
West Bengal
And Anr on 6
September,
1972
http://indiankano
on.org/docfragme
nt/1379027/?
formInput=cases
%20on
%20indemnity
V.M.
http://indiankano
Chockalingam on.org/doc/24218
Chettiar
vs 1/
T.A.S.V.
Alagammai
Achi And Anr.
on 3 February,
1953
The
Presidency
Magistrate,
3rd
Court, held by his order
,dated January 5, 1967 that
the receipt, if believed,
would
establish
entrustment, it could not
be given "even its face
value", since Varma, the
central figure, had failed to
give evidence. Though in
England at that time, he
could have flown to India
for the purpose of giving
evidence.
Besides,
Majumdar's
evidence,
according
to
him,
contained "some points of
obvious
absurdities", in
that Jafray's insistence
that an indemnity bond
should
be Signed by
both Varma and Hoon
indicated that
he could
not have parted with the
share certificates before
Hoon had signed 'that
bond. The case together
with the report went back
to
theChief
'Presidency Magistrate.
In a suit for recovery of
certain money of the
plaintif alleged to have
been
deposited
with
defendant 1, defendant 1
pleaded in his written
statement that the money
deposited with him was
really defendant 2's money
and not the plaintif's and
whole amount due to

the mortgagee under
the
mortgage
and
further charge and that
the amount so brought
into Court be utilised
for the purpose of
paying
of
the
mortgage and further
charge.
Verma
was
not
examined during the
course of enquiry and
this fact resulted in
serious infirmity in the
evidence adduced by
the petitioner. As the
evidence of Varma was
not
of
a
formal
character, his affidavit
could plainly be not
admitted in evidence.
The application having

been rejected by the
Court, defendant 1 has
come up in revision to
this Court.
ADAMSON vs. https://kanwarn.w

JARVIS [1827] ordpress.com/201
4 BING 66
0/11/25/indemnit
y-under-indiancontract-act1872-part-2/
GAJAN
MORESHWAR
vs.
MORESHWAR
MADAN 1942
BOM 302
https://kanwarn.w
ordpress.com/201
0/11/25/indemnit
y-under-indiancontract-act1872-part-2/
that as the money had

been deposited on the
understanding that the
money was to be payable
to defendant 2's order,
defendant 1 Had already
obtained full discharge in
respect of the obligation
which the plaintif sought
to
enforce
by
the
adjustment of the said
money between defendant
2 and himself towards the
debts due by defendant 2
to defendant 1. There was
thereafter an application
made to the Court below to
enable defendant 1 to avail
himself of the third party
procedure provided under
Order 8-A, Civil P. C.
Adamson
was
an
auctioneer who was given
cattle by Jarvis to be sold
at an auction. Adamson
followed the instructions
and sold the cattle. But
Jarvis was not the owner of
the cattle. The real owner
of the cattle sued Adams
for conversion and was
successful. Adamson had
to pay damages and he
then sued Jarvis to be
indemnified for the loss
that he sufered by way of
damages to be paid to the
real owner.
G Moreshwar got a plot in
Bombay for a long lease
period. He transferred the
lease to M Madan for a
limited period. M Madan
started construction over
the said plot and got his
supplies from a K D Mohan
Das.
When
Mohandas
asked for payment, the
defendant could not pay
up. Upon request of M
Madan,
G
Moreshwar
Adamson carried out

Jarviss instructions and
was
entitled
to
presume
that
if
anything went wrong as
per
instructions,
he
would be indemnified.
Jarvis was ordered to
pay
damages
to
Adams.
The Privy Council did

not accept M Madans
stance
that
G
Moreshwar had sufered
no loss and thus could
not
claim
anything
under Sections 124 and
125. The Council held
that
an
indemnity
holder has rights other
than those mentioned
in the Sections above. If
the indemnity holder
Sassoons
M.T. Ltd.,
Vs http://indiankano
on.org/docfragme
nt/1022949/?
formInput=cases
%20on
%20indemnity
Kyzuna
Investments
Ltd v Ocean
Marine Mutual
Insurance
Assoc (Europe
executed
a
mortgagee
deed in favor of K D Mohan
Das.
Mohandas,
the
supplier. Interest rate was
decided and G Moreshwar
put a charge over his
properties. A date was set
for the return of the
principal amount. M Madan
had agreed to pay the
principal
amount,
the
interest and to get the
mortgage deed released
before a certain date. M
Madan
did
not
pay
anything to K D Mohan
Das; it was G Moreshwar
who paid some interest
The event of Sassoons
demanding from M.T. Ltd.
payment of Rs. 4, 50,000
the company could have
been called upon to pay
the amount forthwith by
M.T. Ltd., the company
agreed
to
indemnify
Sassoons for the amount
and gave the security
mentioned in the deed of
mortgage. In my opinion,
therefore, the transaction
contained in the deed of
mortgage is not a surety
ship transaction as argued
on behalf of the liquidator.
If the joint liability is
admitted, no question of
reduction of debt of M.T.
Ltd.
It was held that the words
"agreed value" or "valued
at" were not necessary to
create a valued policy
provided that the parties'
intentions were clear that
there was a specified
agreed value, proposed by
the assured and accepted
by the underwriter.
has incurred a liability

and the liability is
absolute, he can turn to
the indemnifier to take
care of the liability and
pay it of. Thus, G
Moreshwar was entitled
to be indemnified by M
Madan
against
all
liability
under
the
mortgage and deed of
charge.
The legal efect of the

deed
of
mortgage
cannot be controlled in
any
event
by
the
presence or absence of
entries the parties may
make or omit to make
in their books.
The court added that

the use of the term
"sum insured" would
normally indicate the
amount for which the
subject
matter
was
insured and not as
specifying the agreed
value. That sum would
the ceiling of recovery.
Thor
Navigation Inc
v Ingosstrakh
Insurance
[2005]
Australian
case of "Vero
Insurance NZ
Ltd v Posa"
There were two fleet

policies
of
hull
and
machinery insurance. One
policy,
issued
by
the
Russian
insurer,
Ingosstrakh, covered 40%
of the risk. The remaining
60% was insured by a
second policy issued by
Ingosstrakh's
German
subsidiary. The policies
provided
cover
in
materially identical terms
and set out details of each
vessel insured, its owners,
the particular cover terms
applicable to that vessel
and a "sum insured" for
each vessel. The "THOR II"
was listed with a sum
insured of US$1.5 million.
In 2002, it was immobilised
by a broken shaft and main
engine damage and the
repairs were estimated to
cost US$2 million. The
ship-owners gave notice of
abandonment
as
the
repairs were expected to
cost more than the sum
insured. They argued the
vessel was a constructive
total loss.
In that case, Mr. Posa's
pleasure
craft
was
destroyed by a fire at his
home. The insurer sought
to avoid the policy on the
grounds inter alia of failure
to
disclose
material
information at previous
renewals of the policy,
including an alleged failure
to inform the insurer about
previous
unsuccessful
attempts to sell the vessel
below the market rate.
Whether this disclosure
was material depended
partly on whether the
policy was for an agreed
The court held that the

appropriate measure of
indemnity in this case
was the market value of
the vessel at the time and
place of her loss.
The judge in that case

relied on the decision in
"Thor v Ingosstrakh"
and found there was
insufficient intention to
fix a value for the
vessel in the policy
terms. Rather, he held
that the terms of the
cover did no more than
fix a maximum amount
that could be paid out
and the insurable value
remained subject to
determination at the
time the claim was
made. The policy was
therefore unvalued.
value.

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INDEMNITY

It would not be correct to

Osman Jamal http://indiankano

In this case the plaintif

As long as order of this

the plot of land and

whole amount due to

The application having

ADAMSON vs. https://kanwarn.w

that as the money had

Adamson carried out

The Privy Council did

has incurred a liability

The legal efect of the

The court added that

There were two fleet

The court held that the

The judge in that case

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