What type of obligation arises under an indemnity clause?
The case law suggests that courts have been inconsistent in the way that they have interpreted indemnity clauses and the obligations arising under those clauses. There appears to be two alternative obligations that may arise under an indemnity clause: • Preventing loss: An obligation to indemnify another party has been interpreted by some courts as giving rise to an obligation to prevent the loss or harm covered by the indemnity from occurring (for example, Firma C-Trade SA v Newcastle P & I Assn (The Fanti) [1991] 2 AC 1). In other words, it gives rise to an obligation to prevent something from happening rather than a mere obligation to compensate for loss or harm suffered. If an indemnity clause is interpreted in this way, the indemnifier will be in breach of contract if the relevant loss or harm is suffered and will be liable to pay damages for breach of contract to the indemnified party. Therefore, the indemnified party’s remedy under the indemnity will be a claim in damages for br
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