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Guilherme Mazui

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What is the Difference Between Indemnity and Damages?

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Indemnity and damages are two closely related concepts in contracts and agreements, but they have different principles and applications. Here are the main differences between them:

  1. Claims: Indemnity can be claimed for loss arising out of the action of a third party to a contract, whereas damages can only be claimed for loss arising out of the actions of the parties to the contract upon breach of contract.
  2. Scope: Indemnity covers losses even if the contract is not breached, whereas damages can only be claimed for loss arising out of breach of contract.
  3. Purpose: The main principle behind indemnity is to put a person back into the place they were before the loss, restoring them to their original position without making a profit or loss out of it. In contrast, damages are intended to compensate for the loss sustained by a party due to a breach of contract.
  4. Determination: Common law damages for breach of contract are determined in accordance with the principles of common law, whereas a claim under an indemnity is dealt with in accordance with the agreed terms of the contract.

In summary, indemnity is a promise by one party to protect the other party from any loss caused due to an act of the indemnifier or any third party, while damages are a form of compensation for a loss sustained by a party due to a breach of contract. The main difference lies in the scope and purpose of these remedies, with indemnity focusing on restoring the indemnified party to their original position and damages aiming to compensate for the loss caused by the breach.

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  • What is the Difference Between Indemnity and Damages?
  • Comparative Table: Indemnity vs Damages

    • Comparative Table: Indemnity vs Damages

    Indemnity and damages are two closely related concepts in contracts and agreements, but they serve different purposes and have distinct characteristics. Here is a table comparing the differences between indemnity and damages:

    Feature Indemnity Damages
    Definition Indemnity refers to a form of security or protection against certain liabilities or penalties, provided by one party to another. Damages refer to a monetary compensation awarded by the court to a person who has suffered a loss.
    Nature Indemnity is a form of exemption or immunity from liabilities incurred by another, not limited to financial liabilities. Damages are typically of a financial nature.
    Claim Indemnity can be claimed for loss arising out of the action of a third party to a contract. Damages can only be claimed for loss arising out of the actions of the parties upon breach of contract.
    Types of Losses Indemnity covers consequential, indirect, and remote losses, as well as third-party losses, unless specifically excluded in the contract. Damages are subject to the ordinary rules of compensation and are limited to the actual loss suffered by the party claiming damages.
    Claim Prior to Loss Indemnity claims can be made even prior to the party having suffered any actual loss. Damages can only be claimed after the party has suffered an actual loss.
    Duty to Mitigate The duty to mitigate does not apply to indemnity claims. The duty to mitigate applies to damages claims.

    In summary, indemnity provides protection against certain liabilities or penalties, while damages are a form of monetary compensation awarded for a loss suffered. Indemnity can be claimed for losses arising from the actions of third parties, while damages are limited to losses arising from the parties' breach of contract. Indemnity covers a wider range of losses, while damages are subject to the ordinary rules of compensation and are limited to the actual loss suffered by the party claiming damages.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.