To indemnify means to compensate or to make good of the loss and a contract of indemnity means a promise or statement of liability to pay compensation for a loss or for a wrong in a transaction. It is known also bearing the anticipated loss by the party. Indemnity is a security or protection against a contingent hurt, damage or loss. According to section 22 of NCA, 2056, "Where any person has concluded a contract relating to indemnity with the provision to pay to any party to a contract or a third person for any loss or damage that may result from his actions, while working under the direction of that party to that contact, he may realize as compensation."

According to ICA, 1872 section 124, "A contract by which one party promises to save the other from loss, caused to him by the conduct of the promisor himself or by the conduct of any other person, is called a contract of indemnity."

Features of contract of Indemnity:


  • It is a special contract as well as the general


  • It has also necessary to be the all essential elements of valid contract.


  • It is a contingent contract.


  • All matter depends on the agreement of the contract.


  • A contract of indemnity is a security for an anticipated loss.


  • It covers the concerned party as well as the third party.


  • It may be made expressly or impliedly.


  • It covers only the loss caused by an event mentioned in the agreement of contract.


  • It covers only the actual loss.


  • It has two parties.