Indemnification clause employment contract

What is employee indemnification clause? How does indemnification work in a contract? Should indemnification clause be drafted?

An indemnification provision, also known as a hold harmless provision, is a clause used in contracts to shift potential costs from one party to the other. In a mutual indemnification , both parties agree to compensate the other party for losses arising out of the agreement to the extent those losses are caused by the indemnifying partys breach of the contract. In a one-way indemnification , only one party provides this indemnity in favor of the other party. The primary benefit of an indemnification provision is to protect the indemnified party against losses from third party claims related to the contract. They are typically used in agreements where the risks associated with a partys non-performance, breach, or misconduct are high.

For example, agreements that involve the sale of intellectual property rights often include an indemnification by the seller in order to protect the buyer against the potentially large liability associated with an infringement lawsuit by a third party. See full list on nolo. The following is an example of a basic mutual indemnification provision. Remember, any indemnity must be tailored to your specific needs.

Lets say you commission a writer to prepare a speech for you on a work-for-hire basis. Instead of delivering an original speech as promised under the contract , the writer incorporates passages from a speech by another person who then sues you for copyright infringement, claiming that his intellectual property was exploited without his consent. Your agreement with the writer includes a representation and warranty that the work product provided under the contract is original. It also has a standard indemnification provision that promises to hold you harmless from any losses or damages, including attorney fees, incurred as a result of any breach of the agreement. Pursuant to the indemnity, the writer would be obligated to handle the legal defense related to the other writers intellectual property infringement lawsuit against you and cover all of the losses and expenses you incur as a result of the infringement claim.

You would want to include additional language depending on your circumstances. For example, an indemnification can be limited to specific third party claims (such as those related to a breach of warranty), or restricted to only those situations where a lawsuit has been filed or a final judgment has been rendered. If you are the party providing the indemnification , you will want to make sure the clause is as narrowly tailored as possible to protect against the specific risk it is intended to protect against.

There are certain exceptions however. Certain states also prohibit indemnification provisions that provide for punitive damages. Check all applicable laws before drafting an indemnity. Additionally, courts have commonly held that a plaintiff may not recover damages under an indemnity clause to the extent that the damages are an unforeseeable and improbable outcome of the other partys breach, negligence, or misconduct (unless it can be shown that the indemnifying party had knowledge of the relevant circumstances). They should be broad enough to sufficiently address the parties concerns, yet reasonable and equitable in all respects so that their enforceability is not called into question.

Access to the Contract Clause Library is free and is provided as a service to our members and the public. A contract clause is a specific section contained within a legal agreement that is used to describe specific terms , obligations , or representations of the parties to the contract. SAMPLE CONTRACT CLAUSE Consultant agrees, to the extent permitted by law, to indemnify and hold harmless but shall have no obligation to defend the Client and its officers, directors and employees (collectively “Client”) from and against liability for damages to the extent actually caused by the negligent acts, errors or omissions of Consultant and its subconsultants, or anyone for whom the Consultant is legally liable, in the performance of professional services under this Agreement. In general, an indemnification clause is a contractual provision in which one party (or both parties) agree to compensate the other (or each other) for losses that the other incurs and that arise out of the contract. Ten years ago, indemnification clauses were virtually nonexistent in physician employment contracts.

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Online - Select Your Industry Now. Kurtz (Kurt) Holloway. The Court said that is not what an indemnity clause does, and summarized the law of indemnity in employment contracts. Create Easy To Use Employment Contract s. An Company Indemnity clause in an Executive Employment Agreement guarantees that the Company will cover any costs or fees arising from a legal action, including attorney fees. Physicians might be required to reimburse the hospital for all expenses if the hospital is later named as a defendant in a legal action.

This is designed to protect the Executive from personal liability in lawsuits or claims that may be brought against them during their time of employment related to the. They say a picture is worth a thousand words. If you’re a business leader, and you’ve hired a vendor to repair something outside your premises, requiring a contractor and a ladder … what does this picture speak to you? The indemnity clause is industry standard and a part of your standard contract.

Example: Your Contract Contains a Well-Drafted Indemnity Clause. You provide tutoring services. Your contract contains a clause that requires the student to indemnify you and hold you harmless if the student fails to improve his or her grades in school.

One might expect (and rightfully so) that Party A should be responsible for $750of this amount. In order to make it absolutely clear, however, that any immunity Party A might have between itself and its own employee is not effective as regards the indemnification claim by Party B, some additional language in the indemnity clause is helpful. In consideration of the mutual promises made in this Agreement , and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledge the Company and Indemnitee hereby agree as follows: Indemnification. Third-Party Proceedings. To the fullest extent permitted by applicable law, the Company shall.

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