Indemnity: 3 things to note from the Civil Code of Mongolia
- 2024-11-29
- 53
Indemnity obligations arise because of the control, information, and financial position of an indemnifying party. They are viewed as a contractual remedy and risk allocation. The indemnification clause (or indemnification agreement) must be read together with the limitation of liability, representation, and warranty clauses.
1. Mongolian laws have no clear concept of indemnity. However, the Civil Code (2002) provides statutory remedies such as:
- ensuring the performance of obligations
- making good the loss inflicted
Legal liabilities include:
- Compensation for loss
- Liability for the consequences of defects (including defects in rights)
The compensation for loss extends to compensation for:
- expenses incurred by a contracting party; and
- expenses related to the 3rd party claims incurred by the contracting party.
2. The Civil Code declares the freedom of contract, equality, and independence of private parties, and societal morals.
The freedom of contract may mean “contract as you wish subject to moral norms, applicable laws, legal principles, and reasons”.
Private parties may conclude any agreement the substance of which is consistent with the law. This is true when the law (the statute) does not offer any provision about the agreement.
3. The Civil Code also states that “common rules of torts” apply to breaches of sales and purchase agreements.
Is it about the ability to claim expected future revenues (rather than those that flow in with absolute certainty) to recover the loss suffered?