Indemnification

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Indemnification is a tricky topic. In essence, one party agrees to compensate another party for loss or damage. It's commonly used in the insurance field and requires the appropriate agreements and endorsements in order for all parties to have adequate protection. Here are a few things to look for if you're about to enter into an... more »
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Documentation is very important when starting up a new corporation, joining an existing corporation or resigning from a corporation. No matter what your relationship is with the other shareholders or partners in the corporation, do not overlook or skip this step. Proper documentation will help you if any legal issues occur down the road. more »
How Does Property and Casualty Insurance Work?
Property and casualty insurance covers a person in the event that damage or death occurs and they are liable. The two primary types of property and casualty insurance are homeowners and automobile. A homeowners policy covers damage related to weather, fire or other unforeseen damage or if someone is injured or killed in the home. Auto... more »
How to Help Sell a Business
Selling a business is often a pivotal moment in an entrepreneur's life. Many business owners have a significant amount of their net worth tied up in their companies, so maximizing value through the sale of the company is important. Selling a business can be a complex and sometimes overwhelming process; business owners are advised to... more »
How to Create a Loan Agreement
Creating a loan agreement is not particularly difficult, but it's important to ensure that the terms and language expressed in the agreement are ironclad--this way you'll be protected if the loan defaults. There are several items that must be included on a loan agreement. more »

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Indemnity

An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnifying party (A) may or may not be responsible for the loss suffered by the indemnified party (B). Forms of indemnity include cash payments, repairs, replacement, and reinstatement.

General & legal meaning

In common parlance, indemnity is often used as a synonym for compensation or reparation.

As a legal concept, it has a more specific meaning, namely, to compensate another party to a contract for any loss that such other party may suffer during the performance of the contract. For instance, compensation connotes merely a sum paid to make good the loss of another without regard to the payers identity, or their reasons for doing so. As the following paragraphs should explain, an indemnity is a sub-species of compensation, in the same way that compensation and reparation are.

The obligation to indemnify differs from the obligation to pay compensation, or make reparation, in that an obligation to indemnify is a voluntary obligation. If C crashes into Bs car and damages it and the crash is due to Cs negligence, most legal systems will impose liability upon C to pay B for the damage caused. Cs obligation to B arises by force of law irrespective of whether C subjectively wishes to compensate B or not. This is not, therefore, a situation of indemnity; the relationship between B and C is involuntary. In legal terms, it is a case of tortious (common law) or delictual (civil law) liability.

But, if A had a contract with B under which A agreed to pay for any damage to Bs car, then A paying B would be obligatory (even if A subjectively regretted the contract at this point). In legal terms, As liability is contractual and the sum paid is an indemnity. The contract just described between A and B is of course one of automobile comprehensive insurance.

It was stated in the first paragraph that the indemnifying party (A) may also be th read more at » http://en.wikipedia.org/wiki/Indemnity

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