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Chapter 23
The complexity, excessive use of technical terminology, and the “legal” nature
of this chapter makes it a possible candidate for elimination, especially from an
undergraduate class. Each instructor must make his or her own decision as to
whether to teach this chapter, and if so how much to teach. Basic ideas can be
conveyed with much of the intricate detail omitted.
A good way to introduce students to the concept of indemnity is to pose to
them the following scenario. One student owns land and another student wants
an easement (a right–of–way) to transport hazardous materials over the land to
the disposal site. The “owner” authorizes the easement, but wants to include an
indemnity clause in the easement agreement. What protections would the owner
include in such a clause?
light of these risks, here are some obligations the owner may wish to consider
including in the indemnity clause:
• a duty to hold harmless (to pay for any harm you suffer)
• a duty to indemnify (to pay only if you are forced to pay someone else)
• a duty to defend
Now as to other variables in drafting an indemnity clause:
• What would cause these obligations to “trigger”?: any accident or loss, or only if
Another student represents the company that wishes to transport the
hazardous waste. Ask him or her if these obligations are fair and reasonable, or
onerous and one–sided. Is the owner taking advantage of his or her monopoly
position to impose unreasonable indemnity terms? Would you ask for a reduction
in the price of the easement in exchange for assuming these risks?
anti–indemnity statutes delve, look at footnote 7’s discussion of California
statutes. More California statutes are referenced in footnotes 10 and 11. What
are the legislature’s concerns and are they sufficient to justify interfering with
private risk allocation?
Answers to Chapter Questions
1.) What are two fundamental approaches to managing liability associated with the
risks of physical harm?
2.) What is the difference between a direct action and a third–party complaint?
3.) In which two ways can indemnity be conferred?
4.) What is the fundamental principle underlying noncontractual indemnity?
5.) What is the difference between the majority rule and minority rule of
apportionment?
6.) What is contractual exculpation?
7.) What is the difference between an indemnitor and an indemnitee?
8.) What are the five components of an indemnity clause?
9.) What is an indirect function of indemnification?
10.) What are the two types of anti–indemnity statutes and how do they work?
