At your Own Risk! The Ins and Outs of Indemnities

The world of “the indemnity” and the law governing indemnities is a complex one. Most of these indemnities incorporate complex legal terminology that is not easily understandable, often leaving consumers wondering about their rights of recourse. Many agreements, ranging from building contracts to hospital admission documents, include indemnity clauses. These clauses seek to limit the liability of suppliers wherever the supplier may cause damages, personally and/or via its employees.

The recent drowning of a thirteen-year-old Park Town Boys high school learner, Enoch Mpanzi at orientation camp is concerning for many parents. With our children back at school, many parents have already received school consent forms, indemnity and/or waiver forms in respect of general school activities, outings and school camps, which they are told to sign. Parents are held to ransom with these indemnities and in the absence of signing same, your child is not permitted to participate in the activity or to attend the school outing.

The Consumer Protection Act (“CPA”) significantly deals with exemption clauses, waivers, disclaimers and indemnities and prescribes certain fundamental “consumer rights”. The right to “fair, just and reasonable terms” may influence the validity and enforceability of these clauses, as any term that is not in line with the requirements of the CPA may be declared unenforceable and may then be set aside by Court and may include an order to compensate the consumer for losses and expenses. The CPA specifically states that you may not exclude or limit your liability for/to gross negligence, whether you do so by means of an indemnity or disclaimer and prohibits any such term or condition to that effect.

Section 48 provides that a supplier must not require a consumer to waive any liability of the supplier, on terms that are unfair, unreasonable or unjust. The section also lists criteria in order to determine whether a condition is unfair or unreasonable. This includes terms which are, excessively one-sided in favour of any person other than the consumer. Section 49(2) states that, if a provision or notice concerns any activity or facility which is subject to risks, the consumer’s attention must be brought to the fact, nature and potential effect of those risks. The consumer must agree thereto by signing or otherwise indicating acknowledgment thereof. This is required for any risks that are of an unusual character, of which the consumer could not reasonably be expected to be aware.

In the case of Duffield vs Lilyfontein School and Others [2011ZAECGHC 3], Duffield was injured after she fell from a zip wire (‘foofy slide’) whilst partaking  in the Kempston Corporate Adventure Race. The school and the school governing body defended the claim as Duffield had a signed a written injury indemnity form prior to participation in the race.  Duffield contended and the Court agreed with her contention, that the indemnity was conditional upon it being established that the defendants did all things reasonably necessary to ensure that stringent safety measures were put in place during the course of the race so as to limit the risk of personal accident or injury to the participants.

In Naidoo v Birchwood Hotel 2012 6 SA 170 (GSJ) the Court refused to uphold the indemnity and disclaimer notices because it would have been unfair and unjust to the plaintiff who had sustained serious bodily injuries during his stay at the hotel. The learned judge emphasised two important legal principles: public policy in South Africa, includes the notions of fairness, justice and reasonableness and would prevent the enforcement and indemnity clause if its enforcement would be unjust or unfair. The Court could not solely rely on the principle of freedom of contract to override the need to ensure that contracting parties must have access to courts, if they so need. The Court held that to deny the plaintiff judicial redress for injuries suffered from the negligent conduct of the hotel, went against the notions of justice and fairness. The Judge ordered the Hotel to pay the Plaintiff’s damages.

Thus, many indemnity clauses are conditional upon it being established that the indemnifier did all things reasonably necessary to ensure that stringent safety measures were put in place, so as to limit the risk of personal accident or injury. There is never indemnity from malicious dereliction of duty or neglect.  Whilst the CPA does not preclude indemnity clauses, it does offer the aggrieved party a clearer recourse when challenging the enforceability of such a clause.