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Why the excitement, you might ask, for isn’t an indemnity simply a promise to pay a defined sum should pre-agreed circumstances arise? | Why the excitement, you might ask, for isn’t an indemnity simply a promise to pay a defined sum should pre-agreed circumstances arise? | ||
Quite so, 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. | 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 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. | 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. |