How does indemnity function in civil law?

Indemnity functions in civil law as a mechanism to compensate a party for losses or damages suffered, generally as a result of a contractual agreement. In this context, one party agrees to provide a guarantee against financial loss incurred by another party in specific situations, often relating to certain risks or liabilities outlined in a contract. This contractual obligation serves to protect individuals or entities from facing adverse financial impacts due to the actions or omissions of another party. For example, in business transactions, it is common for contracts to include indemnity clauses, ensuring that one party can recover sums paid to resolve claims related to the other party's conduct.

The other options do not accurately capture the essence of indemnity in civil law. A penalty for wrongdoing relates more to punitive damages rather than indemnity. Deciding jurisdiction is a matter of determining the appropriate legal forum for a case and is unrelated to indemnity. Establishing property rights pertains to property law and not to the realm of indemnity, which focuses on compensatory measures rather than ownership issues.