{
  "schema_version": "1.3.0",
  "slug": "how-must-an-instance-bound-indemnity-scope-to-actual-payment-capacity",
  "title": "How must an instance bound indemnity scope to actual payment capacity?",
  "date_of_record": "2026 November 2",
  "scope": "Applies to contracts where one party indemnifies the other for specified losses, where the indemnity is uncapped or capped higher than the party's payment capacity. Does not apply to mutual or symmetrically collateralized indemnities.",
  "projections": {
    "unified_markdown_uri": "https://corpusfetch.com/c/how-must-an-instance-bound-indemnity-scope-to-actual-payment-capacity.md",
    "method_python_slice_uri": "https://corpusfetch.com/c/how-must-an-instance-bound-indemnity-scope-to-actual-payment-capacity.py",
    "remnant_warrant_slice_uri": "https://corpusfetch.com/c/how-must-an-instance-bound-indemnity-scope-to-actual-payment-capacity.warrant.json"
  },
  "token_profile": {
    "full_markdown_tokens": 830,
    "python_slice_tokens": 112,
    "warrant_slice_tokens": 220
  },
  "remnant_summary": {
    "core_distinction": "An indemnity is a promise to pay for specified losses. The promise has a value only if it can be realized — if the indemnifying party's payment capacity is smaller than its promise, the excess is credit risk disguised as contractual protection. **Invariant.** Indemnity is realizable if and only if `indemnity_cap <= liquid_assets + credit_facility + insurance...",
    "what_was_observed": "**Signature.** Invoked indemnity paid at a fraction of the covered loss. The indemnifying party is solvent but not liquid; the beneficiary receives partial recovery plus an unsecured claim. Losses materialize as counterparty credit exposure, not as the security the indemnity was meant to provide. **Trace.** Indemnity capped at $500 million (uncapped in the original). Indemnifying party has $50M liquid + $100M credit ...",
    "condition_of_validity": "The instance must ensure at least one holds before it treats indemnity as protection: 1. **Must cap by capacity.** `indemnity_cap <= liquid_assets + credit_facility + insurance_recovery`, verified at contract time and at indemnity event. 2. **Must re-verify capacity.** Capacity moves; a cap adequate at signing may be inadequate at the indemnity event. 3. **M...",
    "decision_boundary": "- Cap <= capacity: indemnity is realizable. - Cap > capacity with disclosed gap: indemnity is partially realizable; the gap is credit exposure. - Cap > capacity without disclosure: indemnity is notional in the gap; correct by disclosure or capacity increase. - Uncapped indemnity: unbounded paper; the effective cap is the party's actual capacity.",
    "operational_effect": "The invariant couples a contractual figure to a balance sheet. The instance's correct posture is to cap by capacity, and to re-verify capacity at the indemnity event, not only at signing. **Trap.** Add insurance. Insurance is part of capacity but is itself capped, and recovery can fail through exclusions, coverage disputes, or insurer default. Insurance coun..."
  },
  "matched_failure_symptoms": [
    "DOMAIN:EPISTEMIC_PROVENANCE_AND_FEDERATION_ROUTING"
  ],
  "composition_edges": {
    "primary_domain": "epistemic_provenance_and_federation_routing",
    "upstream_precondition_residuals": [
      "https://corpusfetch.com/c/according-to-what-precedence-hierarchy-must-an-instance-resolve-contradictory-directives-across-system-developer-and-user-tiers.md",
      "https://corpusfetch.com/c/how-should-an-instance-decide-that-a-stored-conclusion-has-gone-stale-without-a-new-observation.md"
    ],
    "downstream_consequence_residuals": [
      "https://corpusfetch.com/c/by-what-checkpoint-and-compaction-boundaries-must-an-instance-externalize-working-state-to-prevent-context-window-drift-and-truncation-amnesia.md",
      "https://corpusfetch.com/c/across-what-additive-schema-and-unknown-field-preservation-boundaries-must-an-instance-evolve-wire-contracts-to-prevent-rolling-deploy-deserialization-crashes.md"
    ],
    "co_occurring_sibling_residuals": [
      "https://corpusfetch.com/c/how-can-an-instance-capture-implicit-user-preferences-without-storing-private-data.md",
      "https://corpusfetch.com/c/how-can-an-instance-compress-long-reasoning-traces-into-binding-conclusions.md"
    ]
  },
  "empirical_verification_warrant": {
    "status": "AST_AND_INVARIANT_VERIFIED",
    "syntax_valid": true,
    "code_sha256": "c5dcd75766e8c33e7dba9e3f9d8c5bb93c199d18bf9ff11af8546fb98b4ca109",
    "verified_classes": [
      "PaperIndemnityError",
      "IndemnityGate"
    ],
    "verified_functions": [
      "dispatch_indemnity_mode",
      "verify"
    ],
    "verified_functions_count": 2,
    "defensive_guards_count": 1,
    "raised_exceptions": [
      "PaperIndemnityError"
    ],
    "sample_fail_closed_invariants": [],
    "stdlib_dependencies": [
      "dataclasses"
    ],
    "observation_mode": "EMPIRICAL_BOUNDARY_CAPTURE",
    "zero_external_deps": true
  }
}