> Adamson v. Jarvis
Facts: The plaintiff, an auctioneer, sold certain cattle on instruction if the defendant. It subsequently turned out that the livestock did not belong to the defendant but to another person who made the auctioneer liable and the auctioneer in his turn sued the defendant for indemnity for the loss he had suffered by acting on the defendant’s directions.
Held: The court laid down that the plaintiff having acted on the request of the defendant was entitled to assume that, if, what he did, turned out to be wrongful, he would be indemnified by the defendant.
(i) Two parties
(ii) There should be some loss
(iii) The loss should be caused by the promisor or any other person.
(iv) The indemnifier is liable for that loss only.
> Gajanan Moreshwar v. Moreshwar Madan
Facts: Plaintiff (P) got a plot of land on lease from municipal corp. of Mumbai. P allowed Defendant (D) to erect building on that land. D, in this course, incurred debt of Rs.5ooo from building material supplier (K), twice. On both the occasion, P mortgaged part of the land to K. P, on D’s request transferred the land to D, on the consideration that he (P) would be discharged of all the liabilities arising out of that land. D failed to adhere to his consideration. P filed a suit for discharge of liabilities on him, alleging D to be indemnifier.
Legal Issue: When does the liability of indemnifier commence? Should the indemnity holder be payable only after he has suffered actual loss by paying off the claim? Maxim of English law: “you must be damnified before you can claim to be indemnified”.
Judgment: Process of transformation in law observed by J. Chagla of Bombay High Court as he held in relation to the case: “… if his(indemnity holder) liability had become absolute then he was entitled either to get the indemnifier to pay off the claim or to pay into court sufficient money which would constitute a fund for paying off the claim whenever it was made.” Thus, an indemnity-holder can compel the indemnifier to indemnify even before the indemnity holder has actually suffered the loss. Sections 124 and 125 are not exhaustive on the law of indemnity.
(i) There should be a principal debt.
(ii) There exists a principal debtor, a surety, and a creditor.
(iii) The liability must be legally enforceable.
(iv) There should be a distinct promise of surety.
(v) It should be without misrepresentation and concealment.
(i) Right to indemnity
(ii) Right of subrogation: When on default of the principal debtor the surety pays the entire due amount to the creditor then the surety becomes the new creditor and gets all the rights of the creditor.
(i) Right to send a notice of revocation (only in the case of Continuing Guarantee), but not for transactions which have already taken place before the notice was served.
(ii) Right to receive security: In case of default by the principal debtor when the surety pays everything to the creditor then he has the right to receive the security whether or not he knew about it.
|Number of Parties||Two: indemnifier and indemnified||Three: principal debtor, creditor, and surety|
|Number of Contracts||One: Between the indemnifier and indemnified||Three: between the principal debtor and creditor, between the creditor and the surety, and between the surety and the principal debtor|
|Nature of Liability||There is no classification or sharing of liability and absolute liability rests with the indemnifier.||There will be two types of liability, primary and secondary lying with the principal debtor and surety respectively.|
|Nature of Contract||As it includes only two parties and one contract thus it is simple in nature.||As it includes three parties and three sub- contracts, it is complex in nature.|
|Recovery||If the indemnifier compensates the indemnified for any loss then he cannot recover this amount.||If the surety makes the payment to the creditor on the default of the principal debtor then he can recover that amount from the principal debtor.|
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