Document Type : Research Paper

Authors

• Roohollah Akhoundi Roshanavand ¹
• Hoda Moshfeghi Feyzabadi ²

¹ Assistant Professor in Private Law, Faculty of Law and Social Sciences, Payam Noor University, Tehran, Iran.

² Assistant Professor in Private Law, Faculty of Law, Law Department of Khorasan Higher Education Institute, Mashhad, Iran.

Abstract

  In most contracts, the main effort of the parties is to regulate their contractual relations to some extent and protect themselves from possible disputes at the time of concluding the contract by agreeing on the terms that are used to determine the rights, responsibilities, and obligations of the parties. In fact, in order to get rid of the existing risk and liability or the potential liability that will arise in the future and given the non-mandatory nature of the rules related to civil liability regarding the unity of the harmful and the compensator, the parties to the contract can, by mutual agreement, manage and anticipate the duties and responsibilities resulting from the failure to perform the contract and the possible risks arising from the contract according to their wishes and the nature and importance of the subject matter of the contract; unless restrictions such as public order or mandatory laws restrict their freedom.    One common way to agree on the limits of liability between the parties is to include a clause in the contract called an “indemnity clause.” Under this clause, certain risks and responsibilities that should be imposed on one party by law and legal rules are transferred to the other party to the contract. The party from whom the damage is transferred to another party is called »indemnified« and the other party is called the indemnifier. The main purpose of agreeing to these clauses is to provide and foresee a clear and unambiguous contractual remedy for the recovery of damages arising from factors such as breach of obligation, breach of representation or warranty, claims brought by third parties against the party to be contracted, and other claims specified in the agreement between the parties. Thus, these clauses can include damages that may result from the breach of obligations (contractual or legal) of one party to the other party to the contract or from the breach of obligations (contractual or legal) of one party to a third party.  Today, in the legal systems of common law and civil law, agreements on the indemnity clauses are of great interest to activists in the production, industrial, commercial, and service sectors due to advantages such as transferring or sharing the risk of liability and damages from one party to another and the freedom of the parties to determine its terms. In the legal system of Iran, predicting rules like Taslit and institutions like Guarantor of Jarireh in jurisprudence and insurance and also, the approval of Article 12 of the Civil Liability Law and the acceptance of the possibility of paying the debt by a person other than the creditor in Iranian law, leads us to the conclusion that the agreement on compensation for damages and payment of the debt (contractual and non-contractual origin) by a person other than the creditor and other than the cause of the loss is legitimate and legal. Considering the wide scope of indemnity clauses, the question arises whether these clauses can be applied in construction contracts as well? If the answer is positive, how will the agreement on these clauses be?  Regarding construction contracts, in addition to the above, the absence of a ruling by the legislator prohibiting the transfer of liability from potential perpetrators of damage to other parties involved in the construction process is evidence of the possibility of agreeing on an indemnity clause in such contracts. However, the necessity of observing mandatory rules and public order, as well as the principle of deterrence of civil liability, requires us to consider the agreement on this clause invalid in some cases. Thus, in construction contracts, the indemnity clauses can be agreed between the owner [who is also the employer] and the contractor, the employer and the main contractor, the employer and the subcontractor (subcontractor), the contractor and the supervising engineer, the main contractor and the subcontractor, etc. The manner in which these clauses are formulated depends on several factors, such as the circumstances governing the relationship between the parties, the parties' purpose in agreeing to these terms, the type of main contract, the potential risks of the contract, the degree of control each party has over the risks, the bargaining power of each party, and the legal restrictions imposed on these clauses. The indemnity clause in construction contracts can be agreed based on various criteria, like persons and liabilities covered by this clause, the kind of obligation of indemnifier, and the amount of fault of indemnified. It should be mentioned that, according to the principle of privity of contracts, the indemnified cannot be invoked against the injured party on this clause that has been concluded between himself and the indemnifier. Rather, he should first take action to compensate for the damages and then, based on the indemnity clause, take action against the indemnifier.

Keywords

• The Indemnity Clause
• Construction Contract
• Transfer of Liability
• the Principle of Privity of Contracts
• non-opposability of Contract

Main Subjects

• Private Law