Indemnification can arise from which source?

• A. Contract
• B. Tort
• C. Criminal Penalty
• D. Rescission

Answer: (A)

Indemnification is a promise to reimburse or shield a party from losses, and the usual place this obligation is created is a contract. When parties enter into an agreement, they often include an indemnity clause that requires one party (the indemnitor) to cover specified losses, liabilities, or defense costs for the other party (the indemnitee) arising out of the contract or related activities. That contractual allocation of risk is why contract is the correct source.

Tort damages come from a civil wrong and compensate the injured party, but they don’t create a separate indemnity obligation unless there’s a contract or policy that provides one. A criminal penalty is punishment imposed by the state, not an indemnity. Rescission is the remedy that voids or annuls a contract, not a source of indemnification.

So, indemnification most typically arises from a contract.