Aby T Manimala

Roll no – 006
BA LLB (Sec A)

Contracts Project Report

Q1. Whether the promisee in a contract of indemnity is entitled to

recover from the promisor ?

Spain (Civil Law)

Indemnity becomes a very important concept when we refer to agency

agreements in Spain. Prior notice before termination is established in law,
corresponding to one month’s prior notice per year of contract. There are two
different indemnities in the agency agreement1.

One is the indemnity for clientele, equal to average earnings over the last five
years or lesser period and applicable even in case of the agent’s death; and the
other is the indemnity for damages that the agent can claim, should he or she
consider that termination of the contract will be prejudicial to his or her
interests. This is normally implemented when the agent has been forced to make
investments or employ additional people, etc. as a result of the agreement2.

As already stated, the distributor and the Company have the right to agree
practically all terms of the agreement. Only in those matters that have not been
made the object of a disposition by the parties has jurisprudence made an
analogical interpretation in relation to the agency agreement, the principles of

1
Organisation of Commercial Agents in Spain http://www.cgac.es/
2
Ministry of Commerce . Network of delegations in the different countries
law and contractual good faith. In very general terms, prior notice is expected
and only if nothing to the contrary has been established in the agreement is the
possibility opened up of an indemnity claim for clientele and/ or damages in the
case of termination without cause.

The sales representative indemnity refers to dismissal without cause and is

equal to 45 days’ salary per year of work. In general terms, it is very important
to study the agreement carefully, both in the case of an agent (to draft a contract
taking the law and its interpretation very much into account) as well as in that of
a distributor, drafting all provisions clearly in order to avoid difficulties later.

Choice of law :

It seems unlikely that in the case of an agent carrying out his or her activity in
Spain we could make a choice other than that of the Spanish law on agency
agreements. There can be no doubt, as the law states this as an unwaivable
provision, that jurisdiction in the case of conflict will be that corresponding to
the domicile of the agent.

In the case of the sales representative, Spanish law will rule and only in that
which concerns the distributor will the parties be in a position to choose the
applicable lawn and the jurisdiction they intend to submit their eventual
conflicts .
 Australia (Common Law)

The courts have interpreted an indemnity as giving rise to an obligation in two

alternative respects. The first, being an obligation to prevent the loss or harm
covered by the indemnity to the client from occurring. Under this obligation, the
client is then entitled under the indemnity to make a claim in damages for
breach of contract against the professional.

Such a claim can be made (and succeed) absent tortious fault. The second
obligation is to compensate the client for the event, resulting in a debt. Under
this obligation, the client is then entitled under the indemnity to make a claim
for recovery of that debt as distinct from damages for the breach of contract.3

Again, such a claim can succeed absent tortious fault. The legal effect of
contracting out of the proportionate liability legislation is that the professional
agrees to be responsible for the acts and omissions of others who may have a
liability, be they subcontractors or third parties, instead of only the portion of
loss that the professional would have otherwise been liable for under the
legislation.4

At its simplest, an indemnity is a provision which deems one party harmless for
the actions or inactions of another or others or in specified circumstances. It is a
contractual clause which allocates risk. Indemnities are used to manage risk by
expanding the scope of recovery to which a party may have recourse in respect
of agreed matters, such as property damage or breach of contract. Indemnities
often raise red flags in construction contract reviews and negotiations.

Properly used, indemnities are an important tool for risk management.

Improperly used, indemnities may result in risk allocations which can prove
difficult to manage and enforce.

3
http://www.tglaw.com.au/awms/
4
Julie Clarke, “Austrian Contract Law” (22nd March, 2008) available at-
http://www.australiancontractlaw.com/law/formation-consideration.html.
Q.2 Whether the Indemnifier is liable to the Indemnity even if the
loss is caused by any other person ?

Spain (Civil Law)

Yes the indemnifier will not be liable for the damage even if it is a third party
that has caused the damage.

Even if the damage that is caused by a third party the contract of indemnity that
is made by the initial parties are the indemnitor is liable to pay as the damage
that is done to the indemnitee.5

It must be noted that a claim for indemnification of losses is not a charge of

liability, and the creditor is therefore not required to prove the wrongfulness of
the actions or the guilt of the debtor, etc.

Being a primary obligation, an indemnity will be valid even if the underlying

transaction is set aside; unlike a guarantee, which is dependent on the
underlying transaction.

Furthermore, any variation to the underlying transaction will discharge a

guarantor's (but not an indemnifier's) liability, unless the guarantor consents to
the variation, or the variation is insubstantial or incapable of adversely affecting
the guarantor. For more information on the variation of guaranteed obligations.

5
Contract Law in Spain Reprint Edition by Antoni Vaquer (Author) p.155-158
 Australia (Common Law)

The damage done to the Indemnitee even by a third party the indemnitor will be
the one to pay. Indemnification is a contractual obligation by one party [X] to
pay or compensate for the losses or damages or liabilities incurred by another
party to the contract [Y] or by some third person. 6

An indemnitor is the party who is obligated to pay another. An indemnitee is the

party who is entitled to receive the payment from the indemnitor.

To allocate risk in private contracts, parties employ provisions requiring

msurance covering the terms of the contract as well as indemnification
provisions allocating risk through the contract terms. In private contracts,
indemnification presents little problem, as freedom-ofcontract doctrine includes
a right to provide for indemnification.7

6
[E.g., Weissman v. Sinorm Deli, 88 N.Y.2d 437, 446 (N.Y. 1996); Cal. Civ. Code §2772)].
7
Charles Wolff Packing Co. v. Court oflndus. Relations, 262 U.S. 522, 534 (1923) ("Freedom is the general rule,
and restraint the exception.").
Q.3 Whether the contract of indemnity being a species of contract
must have all the essentials of a valid contract?

Spain (Civil Law)

The essentials of an agreement are fundamental in the agreement of indemnity.

Representations outside of the agreement are not perceived.

There are some inferred guarantees under the Spain Civil Code concerning the
offer of benefits (which could incorporate the offer of shares) identifying with
title and unhampered proprietorship and some essential suspicions about the
amount and the nature of the advantage. In any case, these standards are pointed
more at buyer exchanges and are genuinely constrained with regards to a global
account or M&A bargain.

Suggested guarantees can't be modified, expanded or decreased by contractual

understanding between the gatherings. A dealer can't be held at risk for any
false explanations.

Basic issues, (for example, insurance for liabilities) can't as of now be managed
under guarantees.

On an offer of shares in an organization, inferred guarantees just identify with

the shares themselves and not to title, possession or state of the hidden business
and resources of the organization to which the shares relate.

Generally, this procurement speaks to the Spanish relationship of the English

indemnity. As opposed to before renditions of the draft Civil Code, the last form
of this article ended up being extensively more adaptable. Potentially the chief
hazy issue is the reference to the way that a concurrence on repayment of
misfortunes is gone into by the "gatherings to a commitment."
This procurement might be translated to imply that the commitment to
reimburse misfortunes may just be accepted by the gathering to the vital
commitment; this was the standard that was most obviously explained in the
principal draft of the revisions and, tragically, the last wording does not totally
disperse all questions.
It ought to likewise be noticed that the Civil Code contains no default technique
for computation of indemnifyied misfortunes and requires that the assention
accommodate the sum and strategy for estimation of misfortunes to be
reimburse, accordingly it is alluring that the gatherings determine this in as
extraordinary subtle element as could reasonably be expected in the
understanding.

Australia (Common Law)

As the Indemnity of contract is a part of the contract act it is necessary for the
indemnity of contract to have the essentials of a contract.

In addition a mechanism to reallocate economic value in a transaction, even

when neither party is culpable: In an acquisition transaction, adjusts purchase
price by :
 reallocating consideration based on issues that arise after deal is signed
or closed. In licensing or commercial transactions, apportions risk
 where there may be uncertainty as to scope or enforceability of rights or
the potential for claims.

Indemnification provisions are a means of shifting risk between parties to an

agreement. Part of an integrated risk allocation system also comprised of:
Representations and warranties of the parties,
 including disclaimers of implied warranties and exclusions and
limitations based on disclosure schedules. Limitations of liabilities such
as consequential
 Related damages and contractual “caps” on liabilities. Contractual
statutes of limitation.
 Insurance.
Common types of losses subject to contractual indemnification: Breach of
representation or warranty by [X].

 Breach of agreement or covenant by [X]

 Losses incurred by [Y] under specified conditions
 Third party claims against [Y] for specific subject matter, such as

(1) claims of infringement or misappropriation of IP,

(2) use of goods by the indemnitee,
(3) product defect or liability claims,
(4) claims arising out of death or personal injury.8

To succeed on a claim for indenmification from the federal government, a

contractor must show that:

(1) the federal government's sovereign immunity has been waived for
contractual indemnity claims
(2) that the Anti-Deficiency Act either does not apply to the particular claim or
should not foreclose indemnification.

8
http://www.australiancontractlaw.com/