Indemnity Bond Format

When and how to use this letter

Indemnity bonds appear in employment (training bonds), share transfers (duplicate certificates), tenancy, and commercial contracts — anywhere one party wants protection against loss caused by the other. Before signing, read three things: what triggers the indemnity, what losses it covers (direct only, or consequential too?), and whether there is a cap. An uncapped indemnity for consequential losses is a serious commitment; get legal advice before signing one.

Execute the bond on stamp paper of appropriate value, signed before a notary or two witnesses. Plain-paper indemnities are weak evidence in a dispute, and the stamp duty cost is small compared to the amounts usually at stake. Both parties should keep signed originals.

State the purpose narrowly. A bond indemnifying "any loss whatsoever" is dangerous to sign and often unenforceable for vagueness; a bond covering "any claim arising from the issuance of the duplicate share certificate" is clear and fair. Include an expiry or a defined end point — indemnities should not run forever.

The tip that matters most: negotiate the cap before you need the bond. Once a company asks you to sign, you have little leverage; raising the limit question early — "can we cap this at the certificate's face value?" — is normal business practice, not confrontation. Never backdate an indemnity bond, and never sign one you have not read in full, however routine the other party claims it is.

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