Question

Discuss the following:

·         Lability and indemnity provisions in contracts

·         Have ever heard or experienced litigation on a contract and seen the effect of, or heard discussion of, liability and indemnity provisions? Research the provisions and report on what you find.

Answer 1

A contract may be defined as an agreement between two or more parties that create a legal and mutual obligation. Contract may be entered into orally or in written form. However it would be advisable to have written contracts as oral contracts are challenging when it comes to enforcement. There are clauses which must be included to protect the interest of the parties.

Some of these clauses include indemnity clause or provision which parties commit themselves to compensate the other party for any loss, liability, or harm arising from the contract. The means of how much compensation is to be paid is also included in the contract. For example in an insurance contract, the indemnitor agrees to compensate the insured for any harm or loss that may occur in return for benefits paid by the insured .The main purpose of this provision is to shift the risk from one party to another.

Liability clauses or limitation of liability clauses are used to limit the amount one person has to pay the other person if they suffer loss, damage or harm arising from the contract. This clause must be carefully and reasonably drafted for it to be enforceable . Legal liability may arise from a breach of contract, Negligence or misrepresentation in which a party will be forced to pay damages or loss suffered to the other party. Liability clauses protect parties from potential lawsuits and from paying exorbitant damages and thus these clauses must never be ignored in any contract.