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Indemnity Bond Format: Compensation Legal Document

Indemnity Bond Format

The indemnity bond format is the structure used for indemnity bonds in simple terms. The indemnity bond is the legal document that is used to collect compensation from the principal regarding the agreement.  The indemnity bond assures the holder of the bond that he /she  will be duly compensated if there rise any possible loss.

The bond is used to protect the lender, in situations where the borrower defaults on the legally binding loan. Several people know about surety bonds, but few have complete knowledge.

The need for an indemnity bond can arise in various situations.  You might need an indemnity bond format in cases  when you are buying a home, a share of the company, or indemnity Schemes of the

What do you understand by the word Indemnity?

The dictionary meaning of the word indemnity is protection from losses. It is like security for loss or compensation for the loss.

According to section 124 of the Indian Contract Act indemnity means the promise by the promisor to the promise in case any loss has been caused to him by the promisor himself or by any other person.

By the way of Indemnity, it has been promised that in case of loss –

  • By the person himself or
  • By any other person

The promisor who had entered the indemnity bond format will pay for the losses.

The definition of the section used to cover only those losses which are caused because of the human agency. If the loss arises out of the accident or event which is not related to the conduct of the indemnifier or any other person and the action those are asked by the indemnifier will not incur liability on the for the compensation of the losses suffered by the person for whose benefit the indemnity bond format is prepared.

These Indemnity bond format in Hindi pdf form is available online also. The indemnity format in Hindi is more frequently used in India by the people. One can find indemnity bond India via search results online.

How To Get An Indemnity Bond Format?

To better understand we are taking the illustration – that company A signed as the surety company when the property deal with company B is finalized by.

Company A can put the demand for the completion of the project by the contractor and if any loss arises then due to non-completion of the project it will be bear by the indemnifier.

Any person can get the indemnity bond prepared with the help and assistance of a lawyer or in-house corporate lawyer of companies, there is a prescribed indemnity bond format that needs to be ahead.

In case of loss is made to the indemnity holder then he can file suit for getting the damages for loss and the cost of litigation from the indemnifier.

Types of indemnity bond

The need for getting the indemnity bond format can arise out of a variety of reasons. The types of indemnity bond are mentioned below 

  • Supply agreements
  • Licensing agreements
  • Commercial contracts
  • Loan agreements
  • Legal contracts

The indemnity agreements are of two types and these two need to be distinguished.

  • The first one is inclusive, wherein the important concern is undertaken regarding protecting the promises against any loss
  • Second is wherein the promise is incidentally indemnified against such losses.

Common Types Of Indemnity Bond Are Required For Various Reasons Such As –

  • While borrowing money from the banks
  • Payment release
  • Loss of fixed deposit receipt.
  • Property transfers to the legal heirs require the indemnity bond format.
  • Transfer of property requires the transfer indemnity bond format.
  • In general, corporate transactions
  • Bonds used in general corporate
  • Indemnity bond in general

What Are The Rights Of The Indemnity Holder?

The holder has the right to sue the person who guarantees to bear the losses which acquire because of the conduct of the person himself or others. If there is a clear promise made, then in such cases provisions are made under section 125 Indian Contract Act which specifies the right of the holder.

The point that stakes the brain of the people is whether the indemnifier can be asked to indemnify the holder before the actual loss occurs, or whether the right arises only after the person suffer the actual loss. The indemnity bond format is describing the rights of the holder.

The English common law says that no action could be brought before the actual loss are being caused. But this rule caused problems for the people who are not able to bear the losses themselves, therefore, to remove this difficulty the court of equity had made it clear that it no longer requires that the occurrence of damages must be there, for getting indemnified.

The Indian court also holds the view that an indemnity holder can compel the indemnifier to indemnify even if the holder does not suffer the actual loss.

What is a contract of guarantee?

The contract of guarantee means that the contract has been entered by the parties to perform the promise or liabilities of the third parties in case of default.

The person who provides the guarantee is known as the surety and the person on whose behalf the guarantee has been given is known as the principal or debtor and the person to whom it has been given is known as the creditor.

The promise of guarantee can be oral or written.

For Instance-

Mr. A takes a loan from the banking institution. A had promised that he will repay it. Mr. B also promises that in case Mr. A does not pay the loan, he will.  here Mr. A is the principal debtor and Mr b will be the surety, who had entered the secondary liability. The banking Institution will be the creditor.

The main distinction between Contracts of indemnity and Guarantee.

  • There are two parties in the contract of indemnity which are the person who gives the indemnity known as the indemnifier and to whom it is given is known as the indemnity holder or indemnified. Whereas there are three parties in the guarantee the creditor, the principal or debtor, and the surety.
  • There is only one contract under which a promise is made to indemnify in case of loss. In the case of Guarantee, there are three contacts.
  • The object of the contract is the security of the creditors whereas in Indemnity the promise is made to protect the promise against the loss.
  • The liability of the surety in case of a contract of guarantee is a secondary one. His liability arises only when there is a default on the part of the principal debtor. Whereas the liability of the indemnifier is the primary one.
  • In the matter of guarantee if the surety has discharged the liability, then he will be in the shoe of the creditor. In Indemnity matters, if the person had been providing the loss the indemnifier cannot recover it from any other person.
  • The contract of the indemnity can be oral or written, but the guaranteed contracts are in writing alone.

Advantages of Indemnity bond formats –

The indemnity bonds allow certain advantage to the person who get it made, these are made below –

  • The bonds of indemnity are structured specially to cover the losses sustained by the person. The contract regarding the payment of the losses sustained is made by both parties to the contract of indemnity.
  • The bond protects the indemnifier from sustaining the losses if the indemnified fails to abide by the rules made in the contract
  • The bond of the indemnity is a surety bond. It carves out that if the promisor fails to perform the contractual obligations he will bear the loss.
  • These bonds are a guarantee of financial reimbursement for the harm caused to the person.

Features of the Indemnity bond format –

  • The indemnity bond is made by the trust between the parties, terms of the trust are made out in the bond.
  • The bond ensures that the person will take the cost of only those matters that are made out clearly in the indemnity bond, meaning thereby that event of making the compensation is made clear.
  • The clause made in the bond must be according to the laws, the content should be admissible in the law.

About Indemnity bond format –

The indemnity bond is a legal document that is drafted by a professional expert too. This document must be made on stamp paper. The value of the stamp paper varies according to state, meaning thereby value is different among the state regarding this.

Indemnity bond for the guaranteed performance

Format of Indemnity Bond

This indemnity deed is executed on date --------- at -------------through the Mr---------having his registered office at --------------place. Here referred to as the Indemnifier.  In favour of Mr---------------- having his registered office at -----------place who is herein referred as the indemnified.

Whereas the indemnified herein has awarded to the Indemnifier a sale order no--------------valued at Rs-----------------for the supply of the ----------the number of items. On terms and Conditions as agreed between the parties mutually.

Whereas the clause above mentions the sale order for the guarantee for the supply of products by the Indemnifier to the indemnified. The products of sale should be free from defects the indemnity bond format specifies so in clear terms.

The indemnifier hereby irrevocably agrees to indemnify the indemnified in the event of a faulty supply of goods. The indemnifier will bear the cost of repairs in case of defaulted goods. The cost will be given within six months of the indemnification from the date of sale.


Date -------

Signature with name and designation

Company Seal




On a summing note, we can simply put that indemnity bonds are something that assures the indemnified that in case of any loss which may arise to him, the person who is executing the bond will repay it to you if conditions satisfy the content of the deed made between the parties to it.


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