Indemnity agreement - theory & contract

What is an indemnity clause? Seems to be found in contract law. An indemnity is an obligation by a person (indemnitor) to provide compensation for a particular loss suffered by another person (indemnitee).   or An indemnity clause is a contractual transfer of risk between two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of a specified event. Indemnity clauses play an important role in managing the risks associated with commercial transactions by protecting against the effects of an act, a contractual default or another party’s negligence. The normal tendency is to seek an indemnity which will protect a party to the greatest possible extent against liabilities arising from the actions of another.   Types of Indemnity Clauses There are loosely six types of indemnity clauses, which provide a guide to their scope and operation, including:   Bare Indemnities – Party A indemnifies Party B for all liabilities or losses incurred in connection with specified events or circumstances, but without setting out any specific limitations. These indemnities will be silent as to whether they indemnify losses arising out of Party B’s own acts and/ or omissions, and maybe be interpreted to have the effect of a reverse indemnity   Reverse or Reflexive Indemnities – Party A indemnifies Party B against losses incurred as a result of Party B’s own acts and/ or omissions (mostly Party B’s own negligence)   Proportionate or Limited Indemnities – These are the opposite of Reverse Indemnities. Party A indemnifies Party B against losses except those incurred as a result of Party B’s own acts and/ or omissions   Third Party Indemnities – Party A indemnifies Party B against liabilities to or claims by Party C   Financing Indemnities – Party A indemnifies Party B against losses incurred if Party C fails to honour the financial obligation (ie the primary obligation) to Party B (most often these are coupled with a guarantee), and   Party/ Party Indemnities – Each party to a contract indemnifies the other(s) for losses occasioned by the indemnifier’s breach of the contract.    Read a bit more at: https://www.lexology.com/library/detail.aspx?g=db38e8d6-7451-49e1-9e74-531bf32e0d10

Indemnity Agreement   The undersigned, COMPANY NAME (Pty) Limited, registration number xyz, represented by NAME SURNAME and duly authorised to do so by a resolution of the company dated 1 July 2017 ("the debtor"), agrees to indemnify NAME SURNAME and NAME SURNAME ("the sureties") against any payments which the sureties may be required to make, and any losses which they may incur, arising out of their giving the suretyship undertaking attached as Annexure A ("the suretyship") in respect of the debtor's indebtedness to NAME OF BANK ("the creditor").   1. PRIOR PAYMENT OF CLAIM UNNECESSARY If a claim is at any time made against the sureties under the suretyship, the debtor must, subject to 2, pay the sureties the amount claimed from them. It will not be necessary for the sureties to first pay the claim.   2. PROCEDURE IN RESPECT OF DISPUTED CLAIM 2.1. On receipt of a claim against either or both of the sureties, such surety/sureties must notify the debtor about the claim in writing.  2.2. Within three (3) days after such notice, the debtor must give the sureties full details in writing of any defence to the claim. 2.3. If such details are given within the three days, the sureties may defend the claim at the debtor's expense or failing this give the debtor the opportunity to do so. 2.4. If the sureties at any time wish to withdraw their defence to the claim or to compromise the claim or pay it in full or in part, they must give the debtor prior notice in writing thereof. The debtor may within 3 days of receipt of this notice, take over the defence as far as this may be possible. No action by the debtor or failure to act will prejudice teh rights of the sureties to settle the claim as they see fit. 2.5. The debtor must on request furnish the sureties with a bank guarantee for the amount of the claim together with any costs that the sureties may incur or have awarded against them. 2.6. The defence of a matter for the purpose of this clause will, if the sureties so decide or the debtor so requests, include appeal and review proceedings. 2.7. If the debtor does not give any details of any defence in accordance with 2.2 or if the defences fail in full or in part or if the sureties decide not to raise the defence and the debtor also does not do so, the debtors may not contest the sureties claim for indemnification on the ground that the creditor's claim against them was not enforceable.   3. AMENDMENT OR NOVATION OF SURETYSHIP If the suretyship is amended or novated, the debtor will remain bound by this indemnity except to the extent that it has not consented to and may be prejudiced by the amendment or novation.   4. INTEREST 4.1. If the sureties discharge a claim before the debtor pays them, the debtor must pay interest on the amount paid at two (2) percentage points above the annual prime overdraft rate as recorded by the Reserve Bank from time to time. 4.2. The interest referred to in 4.1. must be compounded monthly in arrears and will accrue from the date of payment by the sureties to the date of payment by the debtor to them.   5. APPLICATION OF NCA AND CPA  The National Credit Act and Consumer Protection Act do not apply due to the fact that the debtor is a juristic person above the respective thresholds of the Acts.   SIGNED at PLACE on DAY of MONTH YEAR...