Indemnity clause

What is indemnification clause? Indemnity clauses provide for financial recovery if a specific or named risk or event in the contract comes to pass. 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 indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. The right to indemnity and the duty to indemnify ordinarily stem from a contractual agreement, which generally protects against liability, loss, or damage.

An indemnification clause is used to shift risk in a contract between the two parties. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. Indemnification clauses in contracts are agreements made within contracts that are used to shift liability between parties or indemnify, or not hold accountable, a party for certain acts for which they might otherwise be held accountable.

An indemnity clause is a contractual transfer of risk between two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of a specified event. Before moving into a rental property, a landlord might require the tenant to sign an indemnity clause in the lease agreement. This would protect the landlord from any loss or damages that the tenant might cause to the property. Indemnity is a contractual obligation of one party (indemnifier) to compensate the loss incurred to the other party ( indemnity holder) due to the 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.

The most important tip for drafting an effective indemnity is to ensure that the clause is worded to suit the particular circumstances of the contracting parties.

If there is a dispute about the operation of a contractual indemnity , the balance of the contract will help to identify how the indemnity operates. An indemnity is a promise, usually made in a contract, to pay money on the happening of a specified event. The indemnity will always identify the beneficiary (the person or company who is indemnified). 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 clause , also known as an indemnification clause , is a standard waiver clause that states that one party won’t hold the other liable for damages, losses, or costs associated with incurred legal issues. For liability waivers, these potential costs are typically the loss, damages, or other legal costs that would arise from a lawsuit. An Indemnification clause acts an inter-party insurance policy, shifting risk and liability between the parties. It does so by creating the obligation that one party (the Indemnitor) will pay for losses the other party becomes liable for (the Indemnitee), either for any losses related to the agreement , or for losses from certain types of claims. The indemnity clause is not mutual and balance however, when the indemnity does not apply to both parties equally.

Often, this will look like the “first way” above, but without the corresponding reciprocal paragraph for the other party. Removing any indemnity for a party is a common way for the party with the stronger negotiating position to shift risk to the weaker party. A boilerplate indemnity clause giving indemnity wording for use in a commercial contract. To access this resource, sign in below or register for a free, no-obligation trial Sign in.

Our Customer Support team are on hand hours a day to help. A broadly worded indemnity clause will be worthless to an indemnified party if the party giving the indemnity does not have the financial resources to make good on its promise. Similarly, the party giving the indemnity would be well advised to consider how it will fund its promise.

If it may not be capable of doing so itself, it may need protection through insurance or some other arrangement. 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.

Personal guarantee and indemnity deed of agreement. MS Word Document, 92. Use the personal guarantee and indemnity deed of agreement when one or more parties is an organisation with.