Contract Of Indemnity: With An Emphasis On Indian Tenant Laws (By- Debanga Barkakati)

Contract Of Indemnity: With An Emphasis On Indian Tenant Laws

 

Authored By- Debanga Barkakati

 

 

Table Of Content

 

1. Certificate of originality
2. Introduction
3. Statement of Problem
4. Research Methodology
5. The   Significance   of    Indemnity   Bonds    in   Property deals
6. Some Recent advancements in Indian Tenant laws
7. Conclusion and Suggestions
8. Bibliography

 

Certificate Of Originality

This is to certify that the research paper I submitted is an outcome of independent and original work. I have duly acknowledged all the sources from which the ideas and extracts have been taken. The project has not been submitted elsewhere for publication.

 

Introduction

 

A contract of Indemnity can be defined as doing something good for someone, a person who has suffered a loss or is assisting him in restoring his previous condition. "Indemnity can be thought of as a sub-species of compensation or damages," whereas a contract of Indemnity can be thought of as a species or a type of Contract; more specifically, a contract of Indemnity is classified as of particular Contract because the subject matter of this type of Contract is unique. Section 124 of the Indian Contract Act of 1872 defines indemnity contracts. The conditions outlined in Section 10 of the Indian Contract Act of 1872, like those outlined in other contracts, must be met. Section 124 of the Indian Contract Act of 1872 defines a contract of Indemnity as "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."

Old English law defines Indemnity as "a promise to save a person harmless from the consequences of an act." Such a promise can be express or implied by the facts of the case."

 

This point of view was demonstrated in 18721. The claimant, an auction house, sold certain items in this case. goods at the request of another person. The person did not own the goods, and actual owner held the auctioneer liable for them. Any Contract of Indemnity brings both expressed and implied promises depending upon specific situations, as expressed and implied promises will depend on the circumstantial basis. One type of Contract is an indemnity contract. The general contract principles apply to such contracts as well, so that rules such as free consent are the legality of an object and are equally applicable. When a party's consent to an agreement is obtained through coercion, fraud, or The agreement is voidable if there is a misrepresentation, just at option of the party whose consent was obtained. obtained in this manner. The Contract Act requires that the agreement's object be lawful. An agreement whose object is contrary to the law or against public policy is either unlawful or void, depending on the provision of the law to which it is subject.

 

Let us dwell on understanding the Contract of Indemnity with our Indian tenant laws. We often hear about landlords facing problems from a tenant who is not paying rent and damaging their property2 . This epitomizes the question of how Indemnity contracts help build trust between landlords and tenants. With the growing progress in the real estate industry there, it will be interesting how the current state of Indian tenant laws with the introduction of the Model Tenancy

 

 

 

1 Adamson vs. Jarvis

2 Niranjan Pal And Anr. vs Chaitanyalal Ghosh And Anr. on 28 April, 1964

 

Act,2021, which is meant to reduce the inadequacies of the pro-tenant nature of the Rental control act.

 

Statement Of The Problem

 

They were analyzing the role of the Indemnity contract with a focus on Indian tenant laws. It has been observed that the Contract of Indemnity has a significant role in the Tenant's indemnification. With existing laws, the Rent Control Act, 1948, which lays down right for both the Tenant and the landlords, the values of an indemnity contract are more emphasized here. Many lease indemnity agreements state that the consideration given by the Homeowner to the insurer for the indemnification is the Landlord's entering into the lease with the Tenant. This project will analyze the recent development in Indian tenant laws and their effects on the Landlord and tenant relationship.

 

 

Research Methodology

 

The project has used the doctrinal research method, which uses secondary sources of information like journal papers, articles, and commentaries to understand the implications of laws on Indemnity.

 

Research Objective

This project will cover the following objectives:

1. 1. To critically evaluate the significance of indemnity bonds in property deals.
   2. To understand the significance of indemnity bonds in tenant laws.
   3. To analyze the recent developments in the Indian Tenant laws.

 

 

 

1. 1. 1. The Significance Of Indemnity Bonds In Property Deals

 

Whenever a property deal is finalized, the surety must sign an indemnity bond and other documents for finalizing a property deal. Usually, a surety company will propose the demand of the bonded contractor to complete the project. Assume the bonded contractor fails to complete the projector; the surety company must find another contractor to finish it. For smoother borrowing of money and property transfer, Indemnity bonds are essential to provide assurance. Indemnity bonds in property transactions are used in many different scenarios, and these scenarios can be of borrowing money from the bank; for the release of payment; In the event of losing a fixed deposit receipt; Transfer property to a legal heir; Property transfer; On death claims; Electricity connection transfer; Government Indemnity schemes. The primary purpose behind proposing indemnity bonds is to give the agreement parties legal protection An indemnity bond helps facilitate the professional and ethical progression of projects. However, the conditions for proposing an indemnity bond.

 

Like any other legal protection Indemnity bond is only imposed in the event of an infringement of the terms of the Contract. The liability arises due to a breach, and the party under fault is entitled to bear the compensation expense to the other party.

 

It is crucial to understand the provisions of the indemnity bond fully. A lack of sound awareness often leads to some dangerous consequences. If the corporation does not agree to fund the costs of the claim, this may harm the firm's image3. Furthermore, this position may paint a corporation as inept and unprofessional, making a severe dent in the position of the corporate. Hence, Failure to pay claims may lead to insolvency, and legal action will occur.

 

An indemnity bond acts as a security bond for the bondholder. It tries to protect the holder by ensuring compensation, especially during any personal loss. The bond has an agreement that safeguards the lender from any loss if the borrower defaults on a loan payment4. In case the contractual agreements with the oblige are not fulfilled by the principal. The principal is always entitled to settle the total bonded amount. If, in a situation, the principal fails to pay the amount which both parties mutually agreed on, the settlement can also be done by utilizing the corporate and personal assets. It should consider that the terms of the bond can be negotiated and with the condition that if the bond is not signed, the condition for the bond will be withheld.

 

With this, the significance of the Contract of Indemnity can be clearly understood in building trust between landlords and tenants. Bonds are like a rental bond, a three-way agreement between the Landlord, Tenant, and the surety provider. Generally, to protect losses arising from the Tenant's default, landlords follow the practice of taking security deposits from the Tenant.

 

Benefits Of Indemnity Bond

Indemnity bonds are known to have the ability to be restructured to compensate for any predicted loss. Both parties will mutually agree on the following conditions in case of an indemnity bond:

• If the principal fails to deliver the agreed-upon commitments, the bond safeguards the very first party from any loss.

 

• • Surety bonds are indemnity bonds. There is no transaction if there is no mechanism to ensure payment—the guarantor guarantees to pay the debt if the contract requirements are unmet.

 

• These bonds provide compensation for just any harm caused by any illegal activities.

 

• When a principal signs an indemnity agreement, he or she agrees to accept the entire financial obligation in case of a bond claim. As a result, they are responsible for all charges instead of the surety.

 

3Devbrata Shastri vs Krishna Ballabh on 17 February, 1953

4 State Bank of India vs Ravindra on 28 May, 1999

 

 

• Whenever a principal signs an indemnity agreement, he or she agrees to accept a total financial obligation in any possible event of a bond claim in the future. Furthermore, they will be responsible for all charges instead of the surety.

 

 

• Foundation of an Indemnity Bond

 

An indemnity bond is built upon the consideration of mutual trust on both parties for the Contract. It only covers compensation for the occurrences described in the Contract. Only such occurrences are accountable to the promiser. All terms under consideration must be acceptable in court. The bond's provisions should be legally binding. A lack of sound awareness can have some severe consequences. The corporation does not agree to fund the costs of the claim, and this may harm the firm's image. Furthermore, this position may paint a corporation as inept and unprofessional.

Failure to pay claims may result in insolvency and legal action.

 

Types Of Indemnity Bonds Used In Corporate Transactions

 

Indemnity bonds are primarily drawn between the employer and the employee. The bond guarantees that the employee will serve the employer for a set period. If the employee violates the Contract and leaves the service before the term is completed, the employee is entitled to monetary compensation.

 

Indemnity bonds are made by people who have lost their share certificates. It enables confirmation that the share certificate is genuinely lost and requests processing of a New Share Certificate.

 

Some Recent Advancements In Indian Tenant Laws

 

 

• • The Model Tenancy Act, 2021

 

Based on the seventh schedule of Article 256 of the Indian Constitution, the land falls within both the state and union lists; it can be noted that the state has exclusive powers to convert laws on subjects on the state list. Given these facts, the Central Government proposed the Model Tenancy Act, 2021, approved by the Cabinet and distributed to all states and union territories for adoption. The Model Act seeks to establish a Rent Authority to regulate the renting of premises, protect landlord and tenant interests, and provide quick adjudication mechanisms for resolving disputes and related matters. It was introduced to address the inadequacies of India's current Rent Control Laws. According to a Task Force for Rental Housing report published in 2008. Later that year, the government decided that 20% of the two crore houses that would be built would be only for rent because affordable rental housing "addresses the issues of the underprivileged and inclusive growth in an even more direct manner than affordable ownership housing."

Later, the Pradhan Mantri Awas Yojana, or Housing for All by 2022 Mission, was launched. The Model Act expands on the ideas proposed in the 2015 Draft Model Tenancy Act. This law is a welcome departure from previous rent control acts, such as the Rental Control Act of 1947, which have been in effect for a long time.

 

Some Observations from the Model Tenancy Act, 2021

 

With the current growth of the Real Estate industry, it will be interesting how the Model Tenancy Act, 2021 will be held up against the existing Rental control acts:

 

• What is the applicability of the Model Act?

 

The Model Act will apply to any building which is let on rent for residential or commercial except hotel and lodging houses. Moreover, which are meant for industrial use but include the garden, garage, and closed parking area.

 

• How is the agreement between the Tenant and the Landlord affected by the Model act?

 

The tenancy agreement will govern the length of the tenancy, which can be extended at the Tenant's request by signing a new agreement. Suppose the Tenant fails to vacate the property at the end of the tenancy period. In that case, the Tenant will be obligated to pay extra rent for the initial two months as well as four times each month's rent for the following two months if the Tenant continues to occupy the premises. In a force majeure event5, the Landlord must allow the Tenant to occupy the premises for one month after the event has ended.

 

• What are the obligations of the Tenant and the Landlord in this Model Act?

 

The Model Act clearly defines both parties' rights and obligations, which should aid in resolving any dispute. It states that the Landlord is liable for structural repairs, whitewashing of walls and painting of windows and doors, shifting and plumbing pipes, internal and external electrical wiring, and related maintenance. The Tenant, on either hand, is responsible for routine maintenance such as changing tap washers and taps and drain cleaning. The Model Act allows the Landlord to hire a property manager whose duties may include collecting rent, inspecting the premises, and carrying out repairs, among other things. The Landlord must provide the Tenant with all pertinent information about the property manager, including the name and purpose of the property manager authorized.

 

If the property manager goes against the Landlord's instructions, he can be fired, and the Tenant can be compensated for any losses6. According to the Model Act, the Landlord and the property manager have the right to enter the premises on the condition that the Tenant is given a 24-hour notice before the entry.

 

 

 

 

Analysis

 

In most lease agreement negotiations, the Tenant usually provides security for performing the lease obligations of the Tenant. Such safety will typically take the form of a bank deposit, a letter of credit, a third-party guarantee or Indemnity, or a combination of the preceding. Preceding. Usually, most landlords prefer lease indemnity agreements over lease guarantees comes of the difference in liability between an indemnifier and a guarantor. An indemnifier takes the position of primary liability, independent of the Tenant, whereas a guarantor assumes only secondary liability. When the first assignee takes over the lease, the original Tenant is usually given an indemnity covenant. The second assignee makes a similar covenant with the first assignee, and so on. Such indemnity covenants could be voiced but are usually implied—statute into assignments or transfers of leases. The assignee agrees to indemnify the assignor against all future rent payments and to perform all the other obligations contained in the lease. Thus, the cycle of indemnities usually builds up as the lease passes from one hand to another.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5 K.S. Puttuswamy vs Union of India.

6 Assa Singh (D) By Lrs. vs Shanti Parshad (D) By Lrs. . on 17 November, 2021

 

 

Conclusion And Suggestions

 

Landlords have a solid legal backup and have their tenants sign an indemnity agreement that tries to ensure that their tenants take responsibility for injuries they may have on the property, loss, or damages to the rental property on their behalf. This also makes room for the tenants to be more responsible for the owners' property and reduce the infliction of injuries that can cause severe damage to the Landlord's property and other factors leading to causing injury to the Landlord's property. With the already pro-tenant nature of the Rent Control Act of 1948, it has been observed that most tenants have misused the provisions of this act in some cases. An indemnity agreement holds one party liable for any harm or loss suffered by the other party due to the promisor's or the other party's actions. Because the law discourages attempting to avoid liability, a simple indemnity provision in an agreement does not always resolve liability issues. Shift their liability onto others or avoid liability. A simple indemnity clause will never solve a liability issue. The law does not favor those who want to avoid liability or seek a waiver of responsibility for their actions. The fundamental reason is that a negligent group should never be allowed to completely transition all assertions and damages created against him to some non-negligent party.

With the given data analysis, it can have the following suggestions:

 

• • Firstly, some archaic tenant laws like the Rent Control Act 1948, which seems to be on the more pro-tenant side, need to be thoroughly revisited and revised.
  • Laws like adverse possession need some revision in implementation as there have been little to no laws, as Indian laws are mostly silent in this aspect.
  • With the recent development of Indian tenancy laws with the Model Act, it has already spurt controversies with mandates the submission of the Aadhaar Card of both Tenant and Landlord while filing rental agreements. As the Supreme Court noted, this provision may be construed as infringing on the right to privacy.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7 K.S. Puttuswamy vs Union of India.

 

 

Bibliography

 

1.             Dubey, N., 2022. The Model Tenancy Act, 2021: Addressing The Inadequacies Of Rent Control Laws - Landlord & Tenant - Leases - India. [online] Mondaq.com. Available at:

www.mondaq.com/india/landlord-tenant--leases/1089306/the-model-tenancy-act-2021- addressing-the-inadequacies-of-rent-control-laws-> [Accessed 25 September 2022].

1. Srivastava, U., Parikh, B., K, N. and Chakraborty, M., 2022. Explained: What the Model Tenancy Act 2021 could mean for landlords and tenants. [online] Citizen Matters. Available at:

[Accessed 25 September 2022].

1. B. Rose, J., 2022. [online] Scholarship.law.marquette.edu. Available at:

[Accessed 25 September 2022].

1. Sushant, P., 2022. [online] Available at: www.nobroker.in/blog/adverse-possession/> [Accessed 25 September 2022].
2. Cleartax.in. 2022. Rent Control Act - Rental Agreement, Rights of Tenant & Landlord. [online] Available at: