What do indemnity clauses in divorce really mean? What does that indemnification clause mean in your contract? What is an indemnity clause in a construction contract? Indemnity Sample Clauses.
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 agains. 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. 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 scope and effect of an indemnity depends mostly on the intention of the parties and the way it is drafte so make sure you pay great attention to. 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.
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. 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. An indemnification clause basically transfers risk from one party to another.
In fact, indemnification clauses are a major player in the ever-waging war over managing risk. 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. Defend” means to pay the client’s legal expenses as it defends itself against a third party claim. This surety indemnity agreement presents the second party name, principal amount, and details of first and second party agreement terms.
It also mentions the amount to pay per annum by the first party to the second party, reimbursement details, breach of agreement fees, and date of the agreement. However, exactly what is covere and to what extent, depends on the specific agreement. An indemnity clause is standard in the majority of insurance agreements.