Indemnity Clause

An Indemnity Clause is a risk management clause with indemnity obligations that ensure the indemnitor party takes responsibility for covering certain costs and losses of the indemniteed party if something goes wrong.

• AKA: Indemnity Agreement.
• Context:
  • It can (typically) aim to protect parties from Contract-Related Financial Losses.
  • It can (typically) have Indemnity Provisions, such as:
    • Indemnifying Party Provision: The party responsible for providing compensation.
    • Indemnified Party Provision: The party eligible to receive compensation.
    • Indemnification Event Provision: The circumstances that trigger the compensation obligation.
    • Indemnity Scope Provision: The types of losses covered.
    • Indemnity Duty to Defend Provision: The indemnitor's duty to defend against claims.
    • Indemnity Exclusions Provision: Exceptions to the indemnification obligation.
    • Indemnity Assumption of Risk Provision: Transfers risk for certain losses to the indemnifying party.
    • Amount of indemnification Provision: The maximum compensation the indemnifying party will provide.
    • Indemnity Time limit Provision: The deadline for the indemnifying party to fulfill its obligation.
    • Indemnity Subrogation Provision: The extent the indemnifying party can recover costs from third parties.
    • Indemnity Notice of Claim Provision: The indemnitee's duty to notify the indemnitor of a claim.
    • Indemnity Choice of Counsel Provision: Rules on selecting defense counsel.
    • Waiver of Subrogation Provision: Limits on the indemnitor's subrogation rights.
    • Indemnity Severability Provision: Maintains validity of clause if any term is invalid.
    • Term of Indemnity Provision: How long the indemnity obligation lasts.
    • Mitigation of Damages Provision: Requires action to limit potential damages or costs.
    • Indemnity Survival Provision: Identifies terms persisting beyond the agreement's conclusion or termination.
    • ...
  • It can (often) be conditioned on Indemnitor Action.
  • It can (often) be in a Indemnification Article.
  • ...
  • It can range from being a One-Sided Indemnity Clause to being a Two-Sided Indemnity Clause.
  • It can range from being a Narrow Indemnity Clause to being a Broad Indemnity Clause.
  • It can range from being a Limited Financial Cap Indemnity Clause to being a Unlimited Financial Cap Indemnity Clause.
  • It can range from being a Real Indemnity Clause (intended for a real contract) to being a Simulated Indemnity Clause (intended for tests and evaluation tasks).
  • ...
  • It can be referenced by a Indemnification Clause Type.
  • It can be referenced by an Indemnity-Related Contract Content-based Issue Spotting Rule.
  • ...
• Example(s):
  • a Construction Contract Indemnity Clause (in a construction contract), where the contractor is obligated to indemnify the client for any damage caused by the contractor's negligence, such as:
    • “CONTRACTOR agrees to indemnify, save harmless, and release DISTRICT, and all its officers, agents, volunteers, and employees from and against any and all loss, damages, injury, liability, suits, and proceedings arising out of the performance of this contract which are caused in whole or in part by the acts or negligence of CONTRACTOR's officers, agents, volunteers, or employees, but not for claims arising from DISTRICT's sole negligence.".
      • Indemnified Party Provision - DISTRICT, its officers, agents, volunteers, employees
      • Indemnifying Party Provision - CONTRACTOR
      • Indemnification Event Provision - negligence by CONTRACTOR's personnel
      • Indemnity Scope Provision - loss, damages, injury, liability, suits, proceedings
      • Indemnity Exclusions Provision - DISTRICT's sole negligence
      • Duty to Defend Provision - duty to save harmless
      • ...
    • ...
  • a Rental Agreement Indemnity Clause (in a rental agreement contract), such as a real-estate agreement indemnity clause where the tenant agrees to indemnify the landlord for any damage caused to the property during the rental period, such as:
    • “The Tenant agrees to indemnify the Landlord against all damages to the leased premises caused by the Tenant's misuse, waste, or neglect, or that of any other person on the premises with the Tenant's consent.".
    • “Renter herby agrees to Indemnify and hold Owner harmless from any and all claims including those of third parties, arising out of or in any way related to Renter’s use of Property or the items of personal property provided therein. Renter assumes all risk of injury or other losses relating to any recreational activities including use of the private swimming pool on the Property and will hold Owner harmless with respect thereto.".
    • “The Tenant shall indemnify the Landlord against any loss incurred by the Landlord as a result of the Tenant’s failure to fulfill any covenant or agreement hereunder or as a result of damage to the Premises caused by the willful or negligent acts or omission of the Tenant."
    • “The Tenant agrees to hold the Landlord harmless and to defend and indemnify the Landlord from and against any and all claims or liability for any injury or damage to any person or property whatsoever arising from, related to, or in connection with the occupancy or use of the Premises by the Tenant."
    • ...
  • a Business Agreement Indemnity Clause (in a business contract), that outlines the circumstances under which one party must indemnify the other against losses arising from legal claims or demands, such as:
    • “Party A shall indemnify, defend, and hold harmless Party B from and against any and all claims, damages, or losses sustained by Party B arising from Party A's breach of this Agreement or violation of any laws and regulations.".
    • “Contractor shall indemnify and hold harmless the State, its officers and employees, against liability, claims, damages, losses or expenses arising out of bodily injury to persons or damage to properties caused by, or resulting from Contractor’s, and/or its employees, own negligent act or omission while Contractor, and/or its employees, perform or fails to perform its obligations and duties under the Terms and Conditions of this agreement.".
    • “The Consultant shall indemnify and hold harmless the Client and its directors, officers, employees, agents, affiliates, successors and permitted assigns from and against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including reasonable attorneys' fees, arising from or relating to any negligent act or omission of the Consultant in its performance of this Agreement."
    • “Supplier will defend, indemnify and hold harmless Company and its officers, directors, employees, agents, successors and assigns from and against all claims, suits, demands, losses, liabilities, damages (including injury and death) and expenses (including reasonable attorneys’ fees) (collectively “Losses”), arising out of or relating to any third party claim that Supplier’s goods or services infringe, violate or misappropriate the intellectual property rights of any third party."
    • ...
  • a Software Licensing Agreement Indemnity Clause (in a software licensing agreement contract), where the Licensee agrees to indemnify the Licensor against any unauthorized use or distribution of the software, such as:
    • “Licensee shall defend, indemnify and hold harmless Licensor, its affiliates and their respective directors, officers, employees and agents from and against any and all claims, damages, obligations, losses, liabilities, costs or debt, fines, restitution, remedies, and expenses (including but not limited to attorney's fees and costs) arising directly or indirectly from or relating to: (i) Licensee’s use of the Licensed Application; (ii) Licensee’s violation of any term of this Agreement; or (iii) Licensee’s violation of any third party right, including without limitation any intellectual property or privacy right.":
      • Software Licensing Agreement Indemnifying Party Provision: Licensee
      • Software Licensing Agreement Indemnified Party Provision: Licensor, its affiliates, directors, officers, employees, and agents.
      • Software Licensing Agreement Indemnification Event Provision: Use of the Licensed Application, violation of the Agreement, violation of third-party rights.
      • Software Licensing Agreement Indemnity Scope Provision: Claims, damages, obligations, losses, liabilities, costs, fines, restitution, remedies, and expenses, including attorney's fees.
  • ...
• Counter-Example(s):
  • Limitation of Liability Clauses, which ...
    • General Liability Clause, which outlines overall legal liabilities without specifying indemnity responsibilities.
  • Arbitration Clause, which focuses on the resolution of disputes through arbitration rather than on financial protections.
• See: Negligence, Hold Harmless Clause, Limitation of Liability Clause, Contract Law, Agency (Law), Contractual Obligation, Financial Liability.

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References

2023

• (Wikipedia, 2023) ⇒ https://en.wikipedia.org/wiki/Indemnity Retrieved:2023-5-9.
  • In contract law, an indemnity is a contractual obligation of one party (the indemnitor) to compensate the loss incurred by another party (the indemnitee) due to the relevant acts of the indemnitor or any other party. The duty to indemnify is usually, but not always, coextensive with the contractual duty to "hold harmless" or "save harmless". In contrast, a “guarantee” is an obligation of one party (the guarantor) to another party to perform the promise of a relevant other party if that other party defaults.

    Indemnities form the basis of many insurance contracts; for example, a car owner may purchase different kinds of insurance as an indemnity for various kinds of loss arising from operation of the car, such as damage to the car itself, or medical expenses following an accident. In an agency context, a principal may be obligated to indemnify their agent for liabilities incurred while carrying out responsibilities under the relationship. While the events giving rise to an indemnity may be specified by contract, the actions that must be taken to compensate the injured party are largely unpredictable, and the maximum compensation is often expressly limited.

2023

• Q: "What Are the Elements of an Indemnity Clause?."
  • A: An indemnity clause covers the following elements:
    • Who is indemnifying whom? An indemnification provision may be mutual or one-way.
    • Arising from what events or circumstances? Third-party indemnities typically cover intellectual property infringement or product liability. Inter-parties may cover all forms of breach of contract, such as non-performance or breach of any contract terms.
    • Covering what types of losses? Losses typically include any damages awarded by the court, plus attorney's fees and other legal costs.
    • What are the qualifications for indemnity? The indemnified party is required to notify the indemnifying party of a claim and permit the indemnifying party to control the defense.
    • What are the exceptions to indemnity? In most cases, the indemnity will not cover situations where the indemnified party modifies the product or service or fails to use it in compliance with its requirements.

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