Page 137 - RISK Management IC 86

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them, particularly when the party is in stronger position.
Hence, if reliance is to be placed on such a clause,
thorough legal knowledge is necessary for its drafting.

Ans.b) Before any decision is to be made to seek to transfer a
risk to another person with whom there is some
contractual relation, some practical points are to be
considered. If it is certain that the liability transfer would
be effective, and will the contract be upheld by courts of
law.

Even if the answers are positive, there may arise another
problem, that whether the party would be financially
capable of compensation in times of major losses.
Therefore usual practice is to back the indemnity clause
by an insurance. Steps should be taken to ensure that the
insurance is adequate in coverage and sum, and is in the
joint name of both the parties.

In some countries, it is the standard practice to use
standard contracts with agreed exclusion, indemnity, and
insurance clauses. In cases where the risk manager's
organization is on the receiving end of indemnity or
exclusion clauses, he should clarify with the insurers so

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