The trigger for a claim for compensation is the suffering of damage covered by compensation. For this reason, the limitation period for a claim for damages does not begin to run until the compensable damage is determined. Alternatively, the inclusion of the words « on demand » may mean that the indemnified party may argue that its claim should be paid once the claim has been made (or at least once the amount has been agreed between the parties). However, that wording would not prevent a party from considering whether a certain amount is covered by the compensation. Ultimately, this can only be resolved through litigation or other dispute resolution proceedings, in which case a payment is only due and payable in accordance with a court order or equivalent order and not « at the request » of the indemnified party. An insurance contract is a type of indemnity contract. Britton and Time Solicitors can check whether the contract contains an insurance clause and whether the type and amount of insurance are sufficient to meet any liability that may exist under the indemnification clause. We always ask for copies of insurance documents. In an industry where the claim for compensation against a regulatory fine may not be a market practice, it should be remembered that it may still be possible to claim compensation for the costs associated with the processing of the regulatory measure and other related losses, if not for the fine itself. Liability insurance is a way for a business (or individual) to obtain protection against claims. This insurance protects the owner from having to pay the full compensation, even if the owner is responsible for the cause of the compensation.
You should also consider whether amounts paid under a particular indemnity will be factored into the contract`s liability limit or whether they will exhaust it. Considering the problem in advance and explicitly formulating to resolve the problem will help avoid further disputes. Sentences such as the following may be helpful: « No amount to be awarded or paid as part of the compensation provided for in clause X shall be taken into account in the financial liability ceiling of clause Y ». When a company signs compensation, it should come as no surprise that the courts give compensation the full force of the meaning of the words used. This is in line with the underlying principle of freedom of contract. Indemnification clauses are included in contracts so that a person entitled to compensation can assume all losses suffered by a contracting party. They can also be used to indemnify the Freemason or the other party from any liability in the event of breach of contract or damage/loss of goods. Most often, indemnification clauses are used to compensate service providers for damage to their property. But then indemnification liability and indemnification clauses go hand in hand.
In the Euro-Asian Oil case, Euro-Asian, after delivering a judgment in favour of Euro-Asian, sought to rely on compensation which entitled it to a more favourable reimbursement of its legal costs. The indemnification was as follows: « To protect, indemnify and hold you harmless [Euro-Asian Oil] from and against all damages, costs and expenses (including reasonable attorneys` fees) that you [Euro-Asian Oil] may suffer. »; John books a package tour through a travel agency that includes a hotel stay. As part of his package travel contract, there is a compensation clause that states that if John causes damage to his hotel room, he is obliged to compensate the hotel. There is also a guarantee in the contract signed by the travel agent, which states that if John is unable to compensate the hotel for the damage, the travel agency promises to compensate the hotel on John`s behalf. Depending on the wording of the clause, compensation may cover: for example, the limitation period of compensation may be longer than for a breach of contract. It is unlikely to be shorter. It would be wrong to say that compensation is like writing a blank cheque for damages. Real estate leases also contain set-off clauses. For example, in the case of a rental property, a tenant is usually liable for damages due to negligence, fines, attorneys` fees, etc., depending on the agreement. Compensation is a contractual agreement between two parties. In this Agreement, a party agrees to pay for any loss or damage caused by another party.
A typical example is an insurance contract in which the insurer or the person entitled to compensation agrees to compensate the other (the insured or the person entitled to compensation) for damage or loss in exchange for the premiums paid by the insured to the insurer. With compensation, the insurer compensates the policyholder, i.e. promises to supplement the person or business for any covered loss. The breach of compensation gives rise to a claim for non-lump sum damages, i.e. without debt (a contractual sum stipulated contractually). It is not a fixed and quantified amount. Unlike guarantees, compensation does not have to be proven in writing and signed by the person liable for compensation. This means, for example, that compensation could be granted by telephone when the contract is concluded.
However, if the terms of the indemnification clause are intended to recover a certain amount in the event of a particular event, and the terms of the indemnification trigger the obligation to pay, this is a debt and not a claim for unliquidated damages. And the right to compensation arises from the inability of the person entitled to compensation to prevent the compensated person from suffering the type of loss specified in the contract. In English law, references to « defend » are also likely to extend compensation to cover the legal costs of defending against allegations of infringement. Not just successful claims. When they are given voluntarily in a contract, they are often given without giving them a second thought about what a claim for compensation can mean for a company. Where our contract attorneys act on behalf of the party providing the compensation, the extent of the losses is limited as much as possible and only to direct losses. Just because a warranty contract stipulates that the guarantor will pay compensation for non-performance of the contract does not necessarily mean that. It is a matter of contractual interpretation to decide whether this is the case or not. If you receive compensation, your goal will likely be to ensure that the claim is treated as a claim or in the same way as a claim. We therefore recommend that you restrict compensation so that the loss is quantified in the contract or easily quantifiable, or that there may be a mechanism in the contract that can be used to quantify the liquidated loss. It is quite common to see the phrase « costs (including reasonable legal fees) » in the list of losses that can be recovered in a indemnification clause.
Following the recent case of Euro-Asian Oil v. Credit Suisse, it appears that the term « reasonable legal costs » in the context of a resulting dispute will have a specific meaning. Compensation forms the basis of many insurance contracts; For example, a car owner may take out different types of insurance as compensation for various types of losses resulting from the use of the car, such as.B. damage to the car itself or medical expenses after an accident. In the context of an agency, a client may be required to indemnify his representative against liabilities arising from the performance of responsibilities in connection with the relationship. Although the events that lead to compensation can be contractually determined, the steps that must be taken to compensate the injured party are largely unpredictable, and maximum compensation is often explicitly limited. Depending on the wording of the compensation, the party seeking recovery does not even have to invoke a breach of contract – usually a breach of warranty – to claim compensation. Compensation can offer important security if the person giving it can afford to pay through an insurance policy. Forcing the claims provider to maintain insurance at a certain level can reduce the risk that they will not be able to pay for you or your organization and face any liability.
There are more ways to avoid liability under collateral than with compensation, as performance of covered obligations is secondary. A claim for compensation arising from a clause in a contract creates a promise from a person: for example, if compensation is to be paid, the reimbursement is in the form of money, repairs or replacements. The type of compensation depends entirely on the terms of the agreement. Compensation is a primary obligation; It is not important to have to prove a breach of contract. This offers a number of advantages over an action for damages for breach of contract: compensation has the effect of creating a remedy to place the person compensated in a situation where he or she has not suffered any loss or damage. This is what liability for compensation means. In the absence of clear words, the parties did not agree that a indemnification clause should apply to the consequences of their own negligence. If a indemnification clause appears in a contract, it is the independent contractual promise that justifies the claim. There is a better measure of loss recovery than would be available in the General Damages Act. The responsibility is usually greater. Whether this is said when negotiating a SPA or not, the real reason for compensation is as follows: according to general law (i.e. subject to the terms of the contract), liability arises from compensation: first of all, you should consider providing for an explicit mitigation obligation.
This could be achieved through a standard clause in the agreement, which applies on a reciprocal basis to all compensations in the respective agreement. .