Lesson 1, Topic 1 of0

11.3 Commencement of liability of indemnifier

In a contract of indemnity, the person who promises to indemnify is known as indemnifier and the person in whose favour such a promise is made is called indemnified or indemnity holder.

Liablity of Indemnifier commences even before actual loss incurres to indemnity holder :-

In the case of Osmal Jamal & Sons Ltd. v Gopal Purushotham , plaintiff company acted as commission agent for defendant’s company for purchase and sell of “hessian” and “gunnies”, and for every such purchase, plaintiff’s firm used to charge commission from Defendant’s company and in return, defendant’s company promised to indemnify the plaintiff’s company from all such losses in respect to this transaction. Thereupon, Plaintiff’s company purchased the product from “Maliram Ramjidas” but Defendant’s company failed to pay for the product and hence, Maliram Ramjidas resold the product at lesser amount to another party and is now asking for the amount of loss incurred from plaintiff’s company. The Plaintiff’s firm went into liquidation and therefore filed a suit for amount of recovery as indemnity from defendant’s company in order to pay Maliram Ramjidas. Defendant’s company argued that, since plaintiff haven’t paid any amount yet, so, they were not entitled to maintain a suit under indemnity but court here HELD that, Indemnity is not necessarily given by repayment after payment. Indemnity requires that, the ‘party to be indemnified ’shall never be called for payment.

Liability of indemnifier arises when indemnified actually suffers loss:-

In the case of Chand Bibi v Santosh Kumar Pal(1933), defendant’s father during purchase of certain property agreed to pay off mortgage debt incurred by the plaintiff along with the promise to indemnify plaintiff if they were anytime made liable for mortgage debt. Defendant’s father failed to pay off the debt and hence, plaintiff filed a suit to enforce the covenant they agreed upon before. But here, court HELD that, suit was premature in relation to contract of indemnity as plaintiff hadn’t incurred any loss yet.