Template:Indemnitycapsule: Difference between revisions

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And that’s about it. An {{t|indemnity}} gives you a right to sue where, without it, you would not have one.
And that’s about it. An {{t|indemnity}} gives you a right to sue where, without it, you would not have one.
In any case, '''[[indemnities]] should not, ''ever'', cover losses arising from [[breach of contract]]'''. Like, ''ever''. Anyone who tells you anything different — and in this old salt’s long and grim experience, many people who should know far better will — should be [[Get your coat|directed to the coat check]].


Here is why: if the other guy has breached the contract, [[Q.E.D.]] ''you have a right of action under the {{t|contract}}''. You don’t need an {{t|indemnity}}. This is self-evidently true.  
====Indemnity for breach of contract? ''No'', sir.====
{{drop|I|n any case}}, [[indemnities]] should not, ''ever'', cover losses arising from [[breach of contract]]. Like, ''ever''. Anyone who tells you anything different — and in this old salt’s long and grim experience, many people who should know far better will — should be [[Get your coat|directed to the coat check]]. Here is why: if the other guy has breached the contract, [[Q.E.D.]] ''you have a right of action under the {{t|contract}}''. You don’t need an {{t|indemnity}}. This is self-evidently true. An indemnity claim for a defined amount of money. It requires no proof of breach, causation, or quantification. All of these things are ''vital'' to the allocation of losses following breach of contract.


Do not start babbling on about how an indemnity relieves the indemnified party the burden of all that tedious mucking around establishing causation, foreseeability and so on: if the loss is that indeterminate, it is not suitable for an indemnity, and the court will require you to prove causation and foreseeability anyway. There are important limitations on one’s liability for [[breach of contract]] — questions of [[causation]], [[remoteness of damage]], [[foreseeability]] and proof of [[loss]] — developed over centuries in the Darwinian crucible of the [[common law]]. They are there for the very good reason that, when things turn to ''vanillasoß'', the parties to a contract are certain to disagree about how badly they are wounded and who is at fault. This is a function of their motivated irrationality and conflicting interests.  
There is, we think, a common misconception amongst eaglery that an indemnity can vouchsafe a claim for breach: that it can, somehow, make recovery under a contract quicker, more certain or more straightforward.  


The reason — the ''only'' reason, readers — a [[well-crafted indemnity]] is supposed to be exempt from this kind of enquiry is that ''it is meant to be a pre-agreed amount'', so there is no ''need'' to get into [[foreseeability]], [[causation]], quantum and so on. You ''did'' foresee it. You ''did'' quantify it: you wrote it into the contract. Hence, if you are inclined to seek indemnification “for any loss of [[any type, kind or variety]] that the [[indemnified party]] shall on its own [[Certificate of indebtedness|certification]] suffer” — and there is scarcely a [[corporate services provider]] out there who is not — you should not be seeking an indemnity. You should be putting on a tin hat and going with a year’s supply of tinned beans and a musket to sit in an air-raid shelter.
It ''cannot''.
 
At the limit, a [[The Well-Crafted Indemnity|well-crafted indemnity]] would stipulate a fixed sum payable on breach of contract, regardless of loss, and this the courts would regard as an ''unenforceable [[penalty]]''.

Latest revision as of 09:48, 2 September 2024

Under an indemnity, one party (the “indemnifier”) agrees to pay the other the “indemnified”) an agreed amount should a specified event occur during the contract.[1]

The “events” covered by an indemnity are usually unexpected costs and expenses the indemnified party incurs while performing obligations under the contract, the benefits of which accrue exclusively to the indemnifying party: things like tax charges levied on a custodian relating to assets it holds for its clients. Without an indemnity, the party incurring these costs would just have to wear them. This would be a windfall for the benefiting party.

An indemnity thus creates a payment obligation under the contract where one would not otherwise exist. If the indemnified event occurs and the indemnifier doesn’t pay, the indemnifiee has an action in breach of contract.

And that’s about it. An indemnity gives you a right to sue where, without it, you would not have one.

Indemnity for breach of contract? No, sir.

In any case, indemnities should not, ever, cover losses arising from breach of contract. Like, ever. Anyone who tells you anything different — and in this old salt’s long and grim experience, many people who should know far better will — should be directed to the coat check. Here is why: if the other guy has breached the contract, Q.E.D. you have a right of action under the contract. You don’t need an indemnity. This is self-evidently true. An indemnity claim for a defined amount of money. It requires no proof of breach, causation, or quantification. All of these things are vital to the allocation of losses following breach of contract.

There is, we think, a common misconception amongst eaglery that an indemnity can vouchsafe a claim for breach: that it can, somehow, make recovery under a contract quicker, more certain or more straightforward.

It cannot.

At the limit, a well-crafted indemnity would stipulate a fixed sum payable on breach of contract, regardless of loss, and this the courts would regard as an unenforceable penalty.

  1. ↑ When you put it like that it sounds rather like a derivative, doesn’t it?
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