Template:Indemnitycapsule

Under an indemnity one party agrees to reimburse the other for specified losses it incurs in performing the contract, even though they don’t arise from breach of contract. This is a fair allocation of loss if one party may incur definable losses which, but for its obligations to the indemnifying party under the contract, it would not. For example, a retrospective tax imposed unexpectedly upon a custodian by dint of its holding a client asset. But that is much more unusual that the incidence of an unnecessary indemnity in a standard form contract. Most of the time the remedies developed over centuries of the common law of contract do just fine. Since indemnities reallocate losses away from those on whom they would naturally fall, and are apt to short-circuit sensible limitations on contractual liability (also developed over said centuries), one should resist indemnities where they are not absolutely necessary. Which is most of the time.