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{{box|An indemnity is nothing more than a contractual promise to pay a defined sum should a pre-agreed circumstance arise.}} | {{box|An indemnity is nothing more than a contractual promise to pay a defined sum should a pre-agreed circumstance arise.}} | ||
But in the hands of mediocre finance lawyers this noble purpose has been derailed. Rather than prudently allocating unwanted outcomes, [[indemnities]] | But in the hands of mediocre finance lawyers this noble purpose has been derailed. Rather than prudently allocating unwanted outcomes, [[indemnities]] seem, to those who wield them, like [[smart bombs]] that surgically eliminate all evil whilst vouchsafing loved ones to the bosom of the Earth while, to those asked for them, they have the hue of the closing stages of a Joseph Conrad novel. There is much misapprehension. Much horror. Much fear and loathing. Much ignorance. | ||
Much ignorance. | |||
====What an indemnity is not==== | ====What an indemnity is not==== | ||
An {{tag|indemnity}} is no ''better'' than a contractual claim. It ''is'' a contractual claim. It does not have a harsher accounting or [[regulatory capital|capital]] impact. You enforce it as you would a breach of contract: by suing the indemnifying person for its failure to pay the indemnified amount. Since (if you've crafted it correctly) it is a claim to pay a pre-defined (or at any rate [[deterministic]]) sum, the elements you need to prove your claim are easily produced: a well-crafted indemnity is therefore apt for [[summary judgment]]. | |||
Note a point of profound importance. While the failure to honour an indemnity is a breach of contract; the occurrence of circumstances permitting a claim under one is not. | |||
Note a point of profound importance. | |||
To claim under a (well-crafted) indemnity, therefore, there is no breach to allege; no loss to prove; no causation required, no value judgment needed to satisfy the indemnitor of your bona fides: all you need prove is: | To claim under a (well-crafted) indemnity, therefore, there is no breach to allege; no loss to prove; no causation required, no value judgment needed to satisfy the indemnitor of your bona fides: all you need prove is: | ||