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Template:Indemnity description: Difference between revisions
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===Of the Animal Spirits=== | ===Of the Animal Spirits=== | ||
Few things are more apt to excite an | Few things are more apt to excite an adequate attorney’s animal spirits than the request of an [[indemnity]]. Once a noble creature of the common law, in the hands of mediocre lawyers the indemnity has fallen upon hard times. Rather than a means of prudently allocating unwanted outcomes, it is seen, to those who would wield it, like a [[smart bomb]] that will surgically eliminate all evil whilst vouchsafing loved ones to the bosom of the Earth. To those asked for to give one, on the other hand, an indemnity invokes the closing stages of a Joseph Conrad novel. | ||
====What an indemnity is==== | |||
Why the excitement, you might ask, for isn’t an indemnity simply a promise to pay a defined sum should pre-agreed circumstances arise? | |||
Indeed | Indeed, if used as the Lords intended. | ||
An indemnity is a sensible way — perhaps the only way — to allocate the risks of externalities two merchants might encounter when providing one another goods and services. | |||
====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 | An {{tag|indemnity}} is no ''better'' than a contractual claim. It ''is'' a contractual claim. It does not have a harsher accounting impact. Its [[regulatory capital|capital]] treatment is the same. You enforce it as you would a breach of contract: by suing the [[indemnifier]] for its failure to pay the indemnified amount. Since (if well crafted) it is a claim to pay a pre-defined (or at any rate [[deterministic]]) sum, proving your claim is not hard and a well-crafted indemnity is apt for [[summary judgment]]. But careful, counsel: aptness for summary judgment depends on how well it is crafted. | ||
Meanwhile, note a point of profound importance. While the failure to honour an indemnity claim is a contractual breach, the circumstances giving rise to one is not. To claim under a (well-crafted) indemnity, one need allege no breach and prove no loss. No [[causation]] is required, no value judgment needed to satisfy the [[indemnifier]] of your bona fides: all you need prove is: | |||
To claim under a (well-crafted) indemnity | |||
*There is an [[indemnity]] | *There is an [[indemnity]] | ||
*The [[indemnified event]] has happened; | *The [[indemnified event]] has happened; | ||
*You have calculated the [[indemnified sum]]. | *You have calculated the [[indemnified sum]]. | ||
Recovering for a failure to honour a (well-crafted) indemnity is | Recovering for a failure to honour a (well-crafted) indemnity is therefore straightforward: You must attest to the above, and the following: | ||
*You have demanded the [[indemnified sum]] from [[indemnifier]]; and | *You have demanded the [[indemnified sum]] from [[indemnifier]]; and | ||
*The [[indemnifier]] has not paid it. | *The [[indemnifier]] has not paid it. | ||
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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 "taxes incurred in performing our services to you": an unavoidable expense that would not arise but for the contract, that has not been priced in, and which has a predictable financial consequence. Indemnities are precision tools for narrow risks, not weapons 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 "taxes incurred in performing our services to you": an unavoidable expense that would not arise but for the contract, that has not been priced in, and which has a predictable financial consequence. Indemnities are precision tools for narrow risks, not weapons of mass destruction. The sky should not fall in under the weight of a well-proportioned {{tag|indemnity}}. | ||
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. | {{box|Indemnities are precision tools for narrow risks, not weapons 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 contract. | |||
If you’re asked for that, refuse. | |||
====How is an indemnity different from a breach of contract?==== | ====How is an indemnity different from a breach of contract?==== | ||