13.10 Indemnity

• Library: Contract Law in Virginia (Virginia CLE) (2019 Ed.)

13.10 INDEMNITY

Indemnity refers to an agreement or undertaking by one person to secure or protect another person against the legal consequences of some act or event on the part of one of them. Technically, it refers only to the situation in which the duty discharged or breached is owed by one of the parties to a third party but, as between that party and the other party, should have been discharged by the other. ⁴¹⁸ Although it has been suggested that true indemnity is not available where the duty breached is owed only to the putative indemnitee, rather than to some third party, this appears to be literally true only with regard to claims for implied indemnity. An express contract of indemnity may provide for one party to indemnify the other against any loss or damage suffered in connection with the contract. ⁴¹⁹ Where the right to indemnity arises from an express contract, Virginia has adopted "the rule followed in the great majority of other jurisdictions . . . that the indemnitee may recover reasonable attorney's fees and expenses of litigation spent in defense of the claim indemnified against." ⁴²⁰ Moreover, "where 'no provision of the contract provides otherwise,' that right extends to any expense reasonably incurred as a result of the breach, including the proper legal costs and expenses incurred in defending an indemnified claim made by a third party against the indemnitee." ⁴²¹

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Indemnity may arise by virtue of an express contract between the parties. An implied contract of indemnity may also arise based on the "special nature" of a contractual relationship between the parties. ⁴²² Finally, a contract of indemnity may be implied by law in the tort context, where a tort-feasor who is only technically or vicariously liable discharges an obligation that should have been the primary responsibility of the other party. ⁴²³ A right to indemnity, however, must necessarily arise out of a contractual relationship. ⁴²⁴

Commercial parties may validly contract for indemnity against their own negligent acts. ⁴²⁵ This rule does not apply, however, where a public duty is involved. ⁴²⁶

Counsel must also carefully consider the effect a contractual indemnity provision might have on other contractual provisions, particularly limitations of remedies and disclaimers of liability for certain categories of damages. In sales transactions, such provisions have been held to be mutually exclusive in a "battle of the forms" context. ⁴²⁷

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