Unsecured Indemnity Agreement

Companies that offer the public somewhat dangerous activities (skiing, paring, amusement parks) require members of the public to sign a compensation contract that exempts the company from liability in the event of an accident. In reality, if the business is considered negligent (defective equipment, poor maintenance), the person who was injured still has a lawsuit against the company. To explain a compensation agreement, it is first necessary to define the concept of “compensation”. Compensation is defined as “the obligation to obtain losses, damages or liabilities incurred by another (Black`s Law Dictionary). Compensation has the general importance of “keeping it unscathed,” i.e., one party considers the other to be harmless for loss or damage. Some variations of meaning for the concept of “compensation”: the language of the contract seems sufficient to compensate the proxy lender, right? False — at least not after the First Court of Appeal. The Court has analysed the specific language of the agreement by applying what it considers to be “common sense” and general principles of interpretation. In particular, the Court held that: (a) the simple terms of the agreement covered liabilities “requested or claimed by the transferee lender,” which would include only the costs claimed by a third party and not the costs incurred by the transfer lender alone (i.e. the examination fee for the pre-sale); (b) in any event, the list of seven categories of liability in the agreement indicates that the seven categories were exclusive, so that the environmental assessment costs incurred by the lender for purposes other than the seven specific categories did not fall within the scope of the agreement.

Unfortunately, the court refused to reimburse the agent for the environmental assessment fee. The context of the case is not unusual. As part of its due diligence, the lender conducted environmental assessments on the ground prior to the closing of the loan, which identified the potential presence of tetrachlored libraries on the site. The lender then returned the mortgage to a second lender (the “agent lender”). When the borrower defaulted the loan, the lender conducted environmental checks on the property before proceeding with the forced execution. The transferees` lender then sought reimbursement of the costs of its pre-examination, but the borrower refused to pay, and the transferees` lender filed a lawsuit, arguing, among other things, that the borrower`s refusal constituted a violation of the environmental compensation agreement.