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Template:Indemnity description: Difference between revisions
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→It is not (necessarily) of indeterminate scope
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Nor is a (well-crafted) {{tag|indemnity}} broader or of less determinate scope than any other contractual claim. It might be to reimburse taxes incurred in performing the contract, or a similar unavoidable expense that would not arise but for the contract. It should have a predictable financial consequence: an indemnity is a precision tool for a narrow risk, not a weapon of mass destruction. The sky should not fall in under the weight of a well-proportioned {{tag|indemnity}}. | Nor is a (well-crafted) {{tag|indemnity}} broader or of less determinate scope than any other contractual claim. It might be to reimburse taxes incurred in performing the contract, or a similar unavoidable expense that would not arise but for the contract. It should have a predictable financial consequence: an indemnity is a precision tool for a narrow risk, not a weapon of mass destruction. The sky should not fall in under the weight of a well-proportioned {{tag|indemnity}}. | ||
{{box|An indemnity is a precision tool for a narrow risk, not a weapon of mass destruction. }} | {{box|An indemnity is a precision tool for a narrow risk, not a weapon of mass destruction.}} | ||
This is where things have gone awry. Many latter-day indemnities are not articulated this way. It is common for indemnities to catch every contingency under the sun: The indemnifier is asked to cover “any and all losses, costs and damages, howsoever arising, incurred or suffered in diligent performance of the | This is where things have gone awry. Many latter-day indemnities are not articulated this way. It is common for indemnities to catch every contingency under the sun: The indemnifier is asked to cover “any and all losses, costs and damages, howsoever arising, incurred or suffered in diligent performance of the contract”. An [[indemnified party]] showing uncommon largesse might the [[indemnifier]] off those losses caused by its own [[negligence, fraud or wilful default]]. That’s another whole story. | ||
If you’re asked for that, refuse. | If you’re asked for something as mad as that, refuse, for it implies your counterpart has not grasped the fundamentals of a bargain: accepting the losses, costs and damages that naturally arise from the diligent performance of its contractual obligations is precisely the consideration your party ought to be offering you. That is why you’re even at the table. Indemnities are there to capture unexpected and unlikely possibilities that ought not to arise, but whose provenance is beyond the promising party’s control. | ||
There are two flavours of these: | |||
*Events that arise from the perfidy of higher powers: changes in law, retrospective taxes, and unbudgeted cost blowouts which are levied on the [[indemnified party]] as a direct result of performing the contract, which it could not reasonably have anticipated or avoided, and which the commercial equity of the situation supports allocating other than where they would naturally fall. In this correspondent’s opinion, that is limited really to retrospectively imposed taxes. Legal changes involving ongoing costs can be solved by re-negotiation or termination. | |||
====How is an indemnity different from a breach of contract?==== | ====How is an indemnity different from a breach of contract?==== | ||