Content
Indemnity Against Risks
This page is an extract from the full topic guidance on Indemnity Against Risk [56KB PDF]. It details any Constraints associated with Indemnity Against Risk, provides a summary of the Authoritative Guidance and lists any essential reading, further reading or associated documents.
If you have any queries on this topic, please contact the Sponsor by email: DGDC CS-2B-1.
None.
Indemnity is an arrangement where one party (the indemnifier)
agrees to pay another (the indemnified) sums of money to compensate the indemnified for a
loss in the circumstances described in the indemnity term.
Indemnities effectively commit Treasury in advance to contingent
expenditure and authority may be required if the liability is significant or of an unusual
nature. Indemnities given for liabilities that arise in the normal course of businesses
are not reportable to Treasury. Nonetheless, acquisition teams must consult the relevant
finance officer and obtain the necessary approval before entering into any commitment.
Indemnities should not be provided to contractors other than in
exceptional circumstances where there is no other practical or value for money alternative
but to accept the liability and there are good defence reasons for doing so.
There are a limited number of circumstances where, as a result of
special risks, the Ministry of Defence (MOD) generally relieves contractors of responsibility for their liabilities
through the use of indemnities. These are listed below and addressed in Authoritative
Guidance:
- Aviation Products
- Aircraft Flight And Taxiing Trials
- Refit And Repair Of Naval Vessels
- Shipbuilding Contracts
- Nuclear Submarine Builders
- Nuclear Risks
- Research and Development Contracts - Guided Weapons
- War Risks
- Diversion Of Orders To MOD From Other Customers
Associated Documents
Annex A - Hedger-Smeeton Agreement [29KB PDF]
Annex B - Specimen Draft Letter To Contractors Concerning Diversions [30KB DOC]
Essential Reading
Insurance Against Risks topic
Warranty topic
Limiting/Excluding Liability For Risks topic
Further Reading
Commercial Risk topic
