RULE 8 - Indemnity

  • Date: 04/08/1997

Does it contain adequate financial and time limits?

Agents should always be careful to ensure that the letter of indemnity covers all claims and costs which could be incurred.  There is little point in obtaining a letter of indemnity for the invoice value of the goods, if a dispute takes five years to litigate.  The amount of the claim will then have doubled as a result of interest and costs.  Agents should always allow for the worst possible scenario when establishing financial limits.

Care should be taken not to accept indemnities which are only valid for a period of, say, twelve months. Court cases are unlikely to be resolved within twelve months and the indemnity could become worthless.

The general rule under English law is to obtain a letter of indemnity valid for seven years; the six year statutory period, plus the additional year which is allowed for the serving of a writ.

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