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Template:Indemnity description: Difference between revisions
→What an indemnity is not
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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 | ====What a (well-crafted) 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 isn't better than a contract===== | ||
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 is not a magic property of all indemnities: it depends on how well you crafted yours. | |||
Meanwhile, note a point of profound importance. While | =====It doesn’t require a breach of contract==== | ||
Meanwhile, note a point of profound importance. While failing to honour an indemnity claim is a contractual breach, the circumstances giving rise to one is not. One need allege no breach and prove no loss to make a claim under a (well-crafted) indemnity. No [[causation]] is required, no value judgment needed to satisfy the [[indemnifier]] of your bona fides: all you need prove is: | |||
*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 therefore straightforward: You must attest to the above, and the following: | 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. | ||
=====It is not (necessarily) of indeterminate scope===== | |||
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. }} | |||
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. | 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. | ||