Indemnity-Related Provision

An Indemnity-Related Provision is a contractual obligation provision that represents an indemnity obligation (defining the responsibilities of the indemnitor towards the indemnitee due to the relevant acts of the indemnitor or any other party).

• Context:
  • It can (often) be within an Indemnity Clause (within an indemnificaiton article).
  • It can (typically) aim to protect parties from Contract-Related Financial Losses.
  • It can range from being a 1-Sentence Indemnity Provision, to being 2-Sentence Indemnity Provision to being a Several-Sentence Indemnity Provision.
  • It can range from being a 1-Element Indemnity Provision, to being 2-Element Indemnity Provision to being a Several-Element Indemnity Provision.
  • It can be referenced by a Indemnity-Related Contract Rule (such as a indemnity-related contract content-based issue spotting rule).
  • ...
• Example(s):
  • Core Indemnity Provisions, such as:
    • Indemnifying Party Provision, with the party responsible for providing compensation, such as:
      • "Contractor shall be the indemnifying party responsible for compensating any and all claims as described herein."
    • Indemnified Party Provision, with the party eligible to receive compensation, such as:
      • "The Company, as the indemnified party, shall be entitled to compensation for losses as outlined in this agreement."
    • Indemnification Event Provision, with the circumstances that trigger the compensation obligation, such as:
      • "This indemnification shall apply in the event of any breach of contract or violation of intellectual property rights by the Contractor."
    • Indemnity Scope Provision, with the types of losses covered, such as:
      • "Contractor shall indemnify Company against any third-party claims arising from Contractor's work."
    • Indemnity Duty to Defend Provision: The indemnitor's duty to defend against claims, such as:
      • "Vendor shall defend and indemnify Client from intellectual property infringement claims related to the software."
  • Limitations and Exclusions Provisions, such as:
    • Indemnity Exclusions Provision: Exceptions to the indemnification obligation, such as:
      • "The indemnity obligation shall not apply to any losses caused solely by Company's negligence."
    • Indemnity Limitation Provision: Caps or limits on the indemnity amount, such as:
      • "The total indemnification obligation under this agreement shall not exceed the total contract value."
    • Indemnity Carve-Out Provision: Specifies exceptions to general indemnity obligations, such as:
      • "The indemnification obligation shall not apply to losses arising from the indemnified party's gross negligence or willful misconduct."
    • Liability Representation Limitation Provision: Limits representation regarding undisclosed liabilities, such as:
      • "The representation regarding the absence of undisclosed liabilities is limited strictly to liabilities required to be disclosed in a balance sheet prepared in accordance with GAAP."
    • Liability Scope Limitation Provision: Qualifies the scope of liability representation, such as:
      • "The representation that [COMPANY] has no liabilities except those disclosed on a balance sheet applies only to liabilities required to be reported under GAAP accounting rules."
  • Specific Claim Types and Costs Provisions, such as:
    • Third-Party Claim Indemnity Provision: Specifies coverage for claims made by third parties, such as:
      • "Supplier shall indemnify Buyer against any third-party claims arising from the use of the supplied products."
    • Legal Costs Indemnity Provision: Includes legal costs within the indemnity scope, such as:
      • "The indemnifying party shall bear all reasonable legal costs and expenses incurred in defending against any covered claims."
  • Risk and Insurance Provisions:
    • Indemnity Assumption of Risk Provision: Transfers risk for certain losses to the indemnifying party, such as:
      • "Contractor assumes all risk for injuries to its personnel while performing work on Client premises."
    • Insurance Interaction Provision: Defines how the indemnity interacts with insurance requirements, such as:
      • "The indemnification obligations herein shall be independent of, and not limited by, any insurance coverage required under this agreement."
    • Indemnity Subrogation Provision: Addresses subrogation rights, such as:
      • "The indemnifying party shall be subrogated to all rights of the indemnified party against any third party with respect to any claim for which indemnity is paid."
  • Legal and Procedural Aspects Provisions, such as:
    • State Law Compliance Provision: Ensures compliance with relevant state laws, such as:
      • "This indemnity provision shall be construed and enforced in accordance with the laws of [State], to the extent permitted by such laws."
    • Indemnity Governing Law Provision: Specifies the governing law for the indemnity, such as:
      • "All matters relating to indemnification under this agreement shall be governed by and construed in accordance with the laws of [Jurisdiction]."
    • Indemnity Jurisdiction Provision: Defines the jurisdiction for indemnity claims, such as:
      • "Any legal action or proceeding arising out of or relating to this indemnity provision shall be brought exclusively in the courts of [Specified Jurisdiction]."
    • Indemnity Arbitration Provision: Specifies arbitration for indemnity disputes, such as:
      • "Any dispute arising out of or relating to this indemnity provision shall be settled by binding arbitration in accordance with the rules of [Arbitration Organization]."
    • Indemnity Limitation of Time Provision: Sets time limits for making indemnity claims, such as:
      • "Any claim for indemnification under this agreement must be made within two (2) years from the date the claim arises."
    • Indemnity Notice Provision: Outlines procedures for notifying parties of indemnity claims, such as:
      • "The indemnified party shall promptly notify the indemnifying party in writing of any claim for which indemnification is sought, providing all available details of such claim."
  • Financial Aspects Provisions, such as:
    • Indemnity Cap Escalation Provision: Provides for adjusting indemnity caps over time, such as:
      • "The indemnification cap shall increase annually by 5% or the Consumer Price Index, whichever is greater."
  • Reciprocal and Survival Provisions:
    • Indemnity Cross-Indemnity Provision: Establishes reciprocal indemnity obligations, such as:
      • "Each party (as an indemnifying party) shall indemnify the other party (as an indemnified party) against losses arising from the indemnifying party's breach of this agreement."
    • Indemnity Survival Provision: Ensures indemnity obligations survive contract termination, such as:
      • "The indemnification obligations set forth in this agreement shall survive the expiration or termination of this agreement."
  • Contract Type-Specific Indemnity Provisions, such as:
    • Rental Agreement Indemnity Provision (within a rental agreement indemnity clause in a rental agreement), such as:
      • "Tenant agrees to indemnify and hold harmless Landlord from any claims arising out of Tenant's use of the property, except for damages caused by Landlord's negligence."
    • Business Agreement Indemnity Provision (in a business contract), such as:
      • "Supplier agrees to indemnify Buyer from any losses resulting from defective products supplied under this contract."
    • Software Licensing Agreement Indemnity Provision (within a software licensing agreement indemnity clause in a software licensing agreement contract), such as:
      • "Licensee shall indemnify Licensor against any claims that the licensed software infringes any third-party intellectual property rights."
  • ...
• Counter-Example(s):
  • Liability Limitation Provision.
  • Force Majeure Provision.
• See: Negligence, Hold Harmless Clause, Limitation of Liability Clause.

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References

2020

• Righardt Allers. (2020). “Win the Game: Contract Playbooks. In: LinkedIn, June 8, 2020
  • QUOTE: ... Indemnities. Indemnity provisions place the risk of something going wrong on one party or other. These are usually among the most heavily negotiated part of a contract. For example, if you are providing software, you typically will indemnify the other side against third-party claims alleging IP infringement. ...

    ...

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