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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Nirmal Pharma promises to compensate Oberoi Distributors for any loss caused by claims a third party, Pinnacle Labs, may make against Oberoi over a batch of supplied medicines. How is this contract classified under the Indian Contract Act, 1872?

It is a contract of indemnity. Section 124 covers a promise by one party to save the other from loss caused by the conduct of the promisor or any other person, and Nirmal promises to save Oberoi from losses arising from Pinnacle Labs' claims.

  1. AContingent contract only, never indemnity
  2. BContract of indemnity, since one party promises to save the other from loss caused by another person's conductCorrect
  3. CContract voidable under rescission provisions
  4. DContract of novation

Explanation

Section 124 defines indemnity as a promise to save the other from loss caused by the promisor's conduct or that of any other person. Claims by Pinnacle Labs fall under conduct of another person, matching the illustration on proceedings by a third party.

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