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Indemnity clauses, also known as indemnification clauses, require one party to reimburse the other for recoverable damages from third-party claims. The indemnifying party is demanding payment. The indemnified party is required to pay. This article further defines indemnity clauses.
- Indemnification Clause: Meaning & Samples (2022)
Indemnification clauses, also known as hold harmless...
- Indemnification: Understanding an Indemnification Clause
An indemnification clause ensures that you don’t face civil...
- Indemnification Clause: Meaning & Samples (2022)
Aug 9, 2023 · What is an indemnification clause? Indemnifications, or “hold harmless” provisions, shift risks or potential costs from one party to another. One party to the contract promises to defend and pay costs and expenses of the other if specific circumstances arise (often a claim or dispute with a third party to the contract).
- What Is Indemnification?
- Why Are Indemnification Provisions Important?
- What Are The Components of A Typical Indemnification Clause?
- Obligation to Indemnify
- Obligation to Defend
- “Hold Harmless” Provisions
- Covered Events
- Recoverable Damages
- Nexus Phrases
- What Are The Common Exceptions to Indemnification?
Indemnification, also referred to as indemnity, is an undertaking by one party (the indemnifying party) to compensate the other party (the indemnified party) for certain costs and expenses, typically stemming from third-party claims. Indemnification can also cover direct claims, which are claims or causes of action that one contracting party has ag...
Indemnification clauses allow a contracting party to: 1. Customize the amount of risk it is willing to undertake in each transaction and with every counterparty 2. Protect itself from damages and lawsuits that are more efficiently borne by the counterparty For example, in a sale of goods agreement, the risk that a product injures a third party is m...
A typical indemnification clause consists of two separate and distinct obligations: an obligation to indemnify, and an obligation to defend.
The obligation to indemnify requires the indemnifying party to:Reimburse the indemnified party for its paid costs and expenses, referred to as losses.Advance payment to the indemnified party for its unpaid costs and expenses, such as:For the indemnifying party, the obligation to defend consists of both: 1. An obligation. The indemnifying party must: 1.1. Reimburse paid defense costs and expenses 1.2. Make advance payment for unpaid defense costs and expenses 2. A right.The indemnifying party has the right to assume and control the defense of the third-party suit. The obligation...
Most indemnification provisions require the indemnifying party to "indemnify and hold harmless" the indemnified party for specified liabilities. In practice, these terms are typically paired and interpreted as a unit to mean "indemnity." However, in some states, the phrase "hold harmless" may require the indemnifying party to advance payment for co...
Covered events are specific types of events that are listed in the indemnification clause. They can vary according to the particulars of the transaction and are subject to negotiation. The most common covered events are: 1. Breach of contract 2. Negligence 3. Bodily injury or death 4. Non-compliance with any laws
Recoverable damages are specific types of damages listed in the indemnification clause. These can vary and are negotiated by the parties. The principal categories of recoverable damages are: 1. Losses.Losses include any covered judgments, settlements, fees, costs, and expenses. The indemnifying party becomes responsible for a loss only after the in...
The phrases "caused by," "related to," and "resulting from" are referred to as nexus phrases. Nexus phrases link the recoverable damages to the covered events. These phrases are typically negotiated by the parties because they either broaden or limit the obligation to indemnify. The indemnified party typically wants to use a broad nexus phrase, suc...
There are a number of common exceptions to indemnification. They generally relate to circumstances where the indemnified party's own actions either cause or contribute to the harm that triggers indemnification. For example, an indemnification provision may exclude indemnification for claims or losses that result from the indemnified party's: 1. Neg...
Feb 25, 2024 · Indemnity is a comprehensive form of insurance compensation for damage or loss. When the term indemnity is used in the legal sense, it may also refer to an exemption from liability...
Feb 1, 2023 · Indemnity clauses are common in contracts, and they shift risk and potential costs from one contractual party to the other. Specifically, an indemnity clause states the conditions under which one party has to compensate the other contractual party for claims, unintentional harms, or other liability that could befall the indemnified party (i.e ...
