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Under an [[indemnity]], one party agrees to pay the other an agreed amount should a | Under an [[indemnity]], one party (the “[[indemnifier]]”) agrees to pay the other the “[[indemnified]]”) an agreed amount should a specified event occur during the {{t|contract}}.<ref>When you put it like that it sounds rather like a {{t|derivative}}, doesn’t it?</ref> | ||
The “events” covered by an {{t|indemnity}} are usually unexpected costs and expenses the [[indemnified | The “events” covered by an {{t|indemnity}} are usually unexpected costs and expenses the [[indemnified]] party incurs while performing obligations under the {{t|contract}}, the benefits of which accrue exclusively to the [[indemnifying party]]: things like [[tax]] charges levied on a custodian relating to assets it holds for its clients. Without an indemnity, the party incurring these costs would just have to wear them. This would be a windfall for the benefiting party. | ||
An {{t|indemnity}} thus creates a payment obligation under the {{t|contract}} where one would not otherwise exist. If the indemnified event occurs and the indemnifi''er'' doesn’t pay, the indemnifi''ee'' has an action in [[breach of contract]] | An {{t|indemnity}} thus creates a payment obligation under the {{t|contract}} where one would not otherwise exist. If the indemnified event occurs and the [[Indemnified|indemnifi''er'']] doesn’t pay, the [[Indemnified|indemnifi''ee'']] has an action in [[breach of contract]]. | ||
And that’s about it. An {{t|indemnity}} gives you a right to sue where, without it, you would not have one. | And that’s about it. An {{t|indemnity}} gives you a right to sue where, without it, you would not have one. | ||
====[[Indemnity for breach of contract]]? ''No'', sir.==== | |||
In any case, '''[[indemnities]] should not, ''ever'', cover losses arising from [[breach of contract]]'''. Like, ''ever''. Anyone who tells you anything different — and in this old salt’s long and grim experience, many people who should know far better will — should be [[Get your coat|directed to the coat check]]. Here is why: if the other guy has breached the contract, [[Q.E.D.]] ''you have a right of action under the {{t|contract}}''. You don’t need an {{t|indemnity}}. This is self-evidently true. | |||