In contract of indemnity, there are certain elements that must be present to ensure the agreement is legally valid. An indemnity contract is a contract between two parties in which one party agrees to protect the other party from any potential losses or damages that may arise from specific events or circumstances. The party providing the indemnity is known as the indemnifier, while the party receiving the indemnity is known as the indemnitee.
The following are the essential elements that must be present in a contract of indemnity:
1. Agreement: There must be a mutual agreement between the indemnifier and indemnitee. This agreement can be in writing or verbal.
2. Losses or damages: The indemnifier must agree to protect the indemnitee from any potential losses or damages that may arise from specific events or circumstances.
3. Lawful consideration: The indemnifier must receive some kind of lawful consideration, such as payment, in exchange for providing the indemnity.
4. Specific events or circumstances: The contract must clearly state the specific events or circumstances that the indemnitee is being protected from. This could be related to a particular product or service provided by the indemnifier.
5. No breach of contract: The indemnitee must not have breached the contract in any way. If the indemnitee has breached the contract, the indemnifier may not be required to provide the indemnity.
6. Subrogation: The indemnifier has the right to subrogation, which means that the indemnifier can step into the indemnitee’s shoes and take legal action against any third party that caused the losses or damages.
7. Time frame: The contract must specify a time frame for which the indemnity is in effect. This time frame could be for the duration of a project, for a specific period, or until a specific event occurs.
In conclusion, when drafting a contract of indemnity, it is essential to ensure that all the necessary elements are present. This will ensure that the contract is legally valid and that both parties understand their rights and obligations. By taking the time to draft a robust and comprehensive contract of indemnity, both parties can protect themselves and avoid any potential legal disputes.