Contract indemnification clause

What is an indemnification clause? What does indemnification and indemnify mean? Indemnification Clause Overview. Such clauses may allow for mutual indemnification, wherein both parties will compensate the other if losses occur due to one party’s negligence, as well as one-way indemnification, wherein only one party will be indemnified from negligence.

The event might lead to special risk or exposure that justifies special attention.

The extent of the risk might be unknown, and not even be capped by an exclusion of liability in the contract. 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 party’s breach of the contract. When an indemnification clause is inserted into a contract , it is meant to transfer risk between the contracted parties. 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. A note on indemnity clauses in commercial contracts , focusing on the law and commercial needs that shape their drafting.

It also suggests an approach to negotiating and drafting an indemnity clause, and the rules of interpretation as they apply to indemnities, with particular reference to words and phrases commonly used in indemnity clauses. An indemnity agreement protects you and allows others to bear the costs associated with damages. It is essential that the agreement itself describes the types of losses being covere including legal fees. 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. An indemnity clause gives one party an obligation to compensate the other if harm or loss arises from the contract.

The danger, however, is when the clause is more extensive than the party thought when they entered into the agreement. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement , except as a result of the.

Subject to Section 13. Some states do not favor indemnity agreements and present limitations to indemnity clauses in construction contracts. An indemnification clause is a common element of contracts, used to formally transfer the risk of potential liability from one party to another. 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 party,” or absorb the losses caused by the other party. A properly worded indemnification clause is critical to reducing risk in a construction contract.

They are particularly useful when the actions of one party are likely to create a risk which the other party would otherwise have to bear. These clauses generally operate to protect one party against the other party’s actions or failures to act that. Often, indemnity clauses are qualified by an exclusion clause.

A subcontractor finding itself in on the receiving end of a claim by the contractor may seek to rely on such an exclusion to reduce its liability. Given the nature of indemnity clauses, it may be the only protection from full liability available to the indemnifying party. E-sign any papers from a comfort of your home, fast and accomplished. When an indemnity clause is triggere the party agreeing to indemnify (the indemnitor) pays the costs, expenses, and fees incurred by the indemnified party (the indemnitee). General principles of indemnity are governed by state statue.

The indemnity clause shifts “third party” risks from one contracting party to the other. If you’re the licensee, pay close attention to the indemnification clause that applies to third-party IP infringement claims. If a court rules that the licensed technology violates someone else’s patent, you want to make sure that your business isn’t disrupted by not being able to use the technology.

They frame various clauses which help to define the indemnity agreement terms and conditions effectively.