Template:Liability carveouts for indemnities: Difference between revisions

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An {{tag|indemnity}} is the one time in a {{tag|contract}} that it makes sense to exclude liability for [[negligence, fraud or wilful default]], a contractual standard which otherwise, as you'll see in that article, seems to be a product of muddy thinking. Generally the standard of conduct one must be held to in a contract is, of course, the contractual one. But where an {{tag|indemnity}} is concerned, one party has agreed to assume liability for the other's loss ''even though the indemnifying party has not breached the contract or even acted foolishly in any way''. And nor the fact that indemnified party has itself performed the contract the end of it: The loss in question arises through the agency of some ''third party'', away from the contract in which the indemnity lies. (A loss as between the two parties to the contract would be governed by the law of contract and breach).
An [[indemnity]] is the one time in a [[contract]] that it makes sense to exclude liability for [[negligence, fraud or wilful default]], a contractual standard which otherwise is the product of muddy logic.  


Hence an indemnifying party will want to restrict its liability under the {{tag|indemnity}} to losses in the incurrence of which the indemnified party has not been negligent, fraudulent or wilfully in default of its obligations, in {{tag|contract}} or in {{tag|tort}}, to {{isdaprov|anyone}} in the world. <br />
Generally the standard of conduct one must be held to in a contract is, of course, the contractual one. But where an [[indemnity]] is concerned, one party has agreed to assume liability for the other’s loss ''even though the indemnifier has not breached the contract or even acted foolishly in any way''. And nor is the fact that indemnified party has itself performed the contract the end of it: The loss in question arises through the agency of some ''third party'', away from the contract in which the [[indemnity]] lies. (A loss as between the two parties to the contract would be governed by the law of contract and breach and ''not'' an indemnity).
 
Here the eventuality is one the parties have not bargained upon, and that is beyond their control. This is just the sort of place where the courts can step in to imply reasonable boundaries on liability. A “[[negligence]]” carve out invites that.
 
Hence the [[indemnifier]] may seek to restrict its liability under the [[indemnity]] to compensate only losses which the beneficiary has not itself been negligent in incurring, in that tortious sense. <br/>

Latest revision as of 13:30, 14 August 2024

An indemnity is the one time in a contract that it makes sense to exclude liability for negligence, fraud or wilful default, a contractual standard which otherwise is the product of muddy logic.

Generally the standard of conduct one must be held to in a contract is, of course, the contractual one. But where an indemnity is concerned, one party has agreed to assume liability for the other’s loss even though the indemnifier has not breached the contract or even acted foolishly in any way. And nor is the fact that indemnified party has itself performed the contract the end of it: The loss in question arises through the agency of some third party, away from the contract in which the indemnity lies. (A loss as between the two parties to the contract would be governed by the law of contract and breach and not an indemnity).

Here the eventuality is one the parties have not bargained upon, and that is beyond their control. This is just the sort of place where the courts can step in to imply reasonable boundaries on liability. A “negligence” carve out invites that.

Hence the indemnifier may seek to restrict its liability under the indemnity to compensate only losses which the beneficiary has not itself been negligent in incurring, in that tortious sense.

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