The main reason why lessors prefer collateral leases is the difference in liability between a lessor and a guarantor. A liberator assumes a primary responsibility independent of the tenant, while a guarantor assumes only a secondary responsibility. The following explanation, taken from an oft-cited Canadian case,1 briefly describes this difference. `A compensation contract includes, in the broad sense, a guarantee contract. But in the more precise sense. an exemption contract is different from a guarantee. A set-off is a contract of one party to keep the other unharmed against losses, but a contract of guarantee is a contract to be responsible for the guilt, failure or miscarriage of another party, who is primarily responsible for the promise. „If one of the parties agrees to take out insurance for a particular risk, the courts have decided that the insurance obligation would benefit the other party and exempt it from liability for that risk. The same applies when the other party has negligently caused the risk, such as for example.
B a fire. In this scenario, the party should, with the insurance indicated in the rental agreement, turn to its insurer when the risk arises, and not to the other party. Slight changes in wording can lead to great effects. There are different types of compensation agreements: compensation in a broad form, intermediate compensation, compensation in limited form, comparison, implied, etc. Before hiring a contractor, a construction company may require contractors to sign a compensation agreement to protect against claims in the event of a contractor`s fault. (Learn more about the 3 types of indemnification clauses in the construction sector) In construction contracts, Illinois has statutes that prevent the indemnitee (owner or GC) from transferring its exclusive negligence to an indemnity contractor (subcontractor). But there are no such statutes for leases in Illinois. The common law may prevent an owner from transferring through gross negligence, but the facts of each case would determine the outcome. I am not a lawyer, as you may know. I do not negotiate leases for others and I am not aware of court decisions and amendments to the articles of association.
It is important to check your lease with a lawyer. Many additional clauses are usually found in rental liability agreements and should be carefully considered when concluding the contract. While this may not be strictly necessary for the effectiveness of the agreement, these clauses often clarify or broaden the scope of compensation or waive any defences that the indemnification may invoke when asked to perform its obligations under the compensation. In case of skydiving, it is the parties who participate in a compensation agreement: in simple terms, compensation is safety or protection against loss. Compensation is most often referred to as „keeping unharmed,“ usually with respect to one`s own actions. There are pitfalls that can lead to a lease being deemed unenforceable by a court. While it goes beyond the scope of this article to promote all of them, an example would be a substantial modification of the rental agreement agreed between the tenant and the lessor which, if not approved through the compensation intermediary, may lead to the exemption of its obligations for the compensater, although the language of the compensation agreement says otherwise. Referring to all the above-mentioned principles, as well as to the tenant`s insurance contracts and the immunity contract, the lessor argued that it was protected from the tenant`s rights.
The lessee argued that the lessor`s compensation agreement, by providing compensation for the negligence of the lessor`s contractor, was of the utmost importance for these other clauses. The tenant argued that the lessor`s indemnification agreement is something that is „specifically provided for in the rental agreement“, therefore the immunity agreement does not apply.. . . .