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There is always a need to ensure that risk-distribution rules interact in a treaty. If the .B agreement contains substantial compensation which indicates that the compensated party compensates the compensated party for all losses suffered for specific reasons, and also contains an exclusion of any damage which provides that neither party is liable for the consequent damages to the other party, the agreement presents an intrinsic inconsistency that is not good for both parties. , since neither party is responsible for the consequent damage. , the compensated party does not know whether, for example. B, his reputation or other consequential damages will be compensated, and the compensated party does not know whether it is responsible for reputational damage or other consequential damage). Another example: third-party claims can normally be classified as consecutive damages. In the case of an agreement involving both compensation for third-party claims and an exclusion of prejudice, the agreement involves an internal conflict that may leave it to a judge or jury to determine the outcome envisaged by the parties. It is therefore important to ensure that contracts explicitly address how compensation clauses and injury exclusions interact with each other. How does compensation differ from a guarantee? A guarantee and compensation are two different tools that serve two different purposes. Here are some of the common themes of compensation found in supply contracts: According to the Black`s Law Dictionary (10th edition 2014), compensation is an “obligation to make all losses, damages or liability of another.” In essence, compensation is a promise to reimburse a person for damage suffered by that person.

The obligation to compensate is often limited to the rights of third parties. In addition, there is generally a “defence component” of compensation that requires the party to compensate to take over the defence of the right on behalf of the compensated party. In addition to taking careful account of the scope of the compensation obligations themselves, it is also important to take into account compensation procedures: compensation is an effective instrument for allocating risks that deserves critical attention and attention, both on the merits and administrative level.