Indemnification clause

What does that indemnification clause mean in your contract? Is your indemnification provision enforceable? Can any agreement include an indemnification clause?

In most cases, these clauses are used to make sure that a potential loss will be compensated. If you are the party covered by this clause, it means that the other contractual party is promising to compensate you if their actions cause you to suffer a loss.

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. These provisions require one party to assume responsibility for third party claims made against the other party, and they’re very commonly used in construction contracts.

In fact, indemnification clauses are a major player in the ever-waging war over managing risk. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurodollar Loans after the Borrower. This indemnity is for use in materials transfer agreements, University transferring. This paragraph adds obligations concerning notification and defense of claims and cooperation. It may be added to any indemnification upon Sponsor’s request or at the discretion of the component.

Both parties agree that upon receipt of a notice of claim or action arising out of the activities to be carried out pursuant to the project described in Attachment A, the party receiving such notice will notify the other party promptly. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now! Another Party Liable for Risk. Liabilities, Claims, or Damages. Sponsor agrees, at its own expense, to provide attor.

Legally defined as, “to make reimbursement to one of a loss already incurred by him,” an indemnity clause states that one party agrees to “indemnify the other. This is an example of what a typical indemnification clause can look like: “Party A will perform work at own risk, and indemnifies Party B against all loss, damages, expense, and liability resulting from injury to property. Kurtz (Kurt) Holloway. An indemnification is where the giver of the indemnity tells the other party “I’ve got your back.

If you agree to indemnify your client for anything other than damages arising out of your negligence in the performance of professional services, you will be contractually liable. An indemnity commonly appears in the form of a clause or provision in a legal contract. This language is included in cases where there is a possibility of loss or damage to one party during the term of, or arising from the circumstances of, the contract.

Indemnity Provision or Clause.