Exceptions to Infringement Indemnity Clauses: Understanding the Limitations

Introduction

When it comes to commercial contracts, indemnification clauses play a crucial role in allocating risk between the parties involved. These clauses are designed to provide protection against claims and liabilities arising from intellectual property infringement. However, it's important to understand that there are exceptions to these indemnity clauses. In this article, we will explore the various exceptions to infringement indemnity clauses and their implications.

Exceptions to Supplier's Indemnity Sample Clauses

One of the common exceptions to supplier's indemnity clauses is the limitation based on the use of the product in combination with other products. According to Section 14.1, the supplier has no obligation to indemnify the buyer if the claim of infringement is caused by the use of the product in combination with any other product. This exception recognizes that the supplier cannot be held responsible for infringement claims that arise due to the combination of products.

Indemnity Exclusions for Goods Made According to Specification or Industry Standard

Another important exception to consider is the indemnity exclusion for goods made according to specification or industry standards. This exclusion states that the indemnification obligations do not apply to infringement actions or claims that result from the use of goods in violation of the terms of the agreement or the seller's terms of use. It also excludes claims that arise from any alteration or modification of the goods by any person other than the seller or its authorized agent.

Indemnification Clauses in Commercial Contracts

Indemnification clauses are a common feature in commercial contracts and are essential for risk allocation. These clauses outline the obligations of each party to indemnify the other party against claims and liabilities. However, it's important to be aware of the limitations and exceptions that may apply to these clauses.

Obligation to Indemnify

The obligation to indemnify is a key component of indemnification clauses. It requires one party to compensate the other party for any losses, damages, or liabilities arising from a third-party claim. However, this obligation may be limited or excluded in certain situations.

Obligation to Defend

In addition to the obligation to indemnify, some indemnification clauses also include an obligation to defend. This means that the indemnifying party must provide legal defense for the other party in case of a third-party claim. However, like the obligation to indemnify, the obligation to defend may be subject to exceptions and limitations.

Hold Harmless Provisions

Hold harmless provisions are another important aspect of indemnification clauses. These provisions require one party to protect and hold the other party harmless from any claims or liabilities arising from a specific event or action. However, it's important to review these provisions carefully, as they may also have exceptions and limitations.

Common Limitations on the Indemnifying Party's Obligation to Indemnify

There are several common limitations that may apply to the indemnifying party's obligation to indemnify. These limitations are often included to protect the indemnifying party from excessive liability and ensure a fair allocation of risk between the parties. Some of the common limitations include:

• Covered events: The indemnifying party may only be obligated to indemnify the other party for specific events or actions listed in the contract.
• Recoverable damages: The indemnifying party may only be liable for certain types of damages that are recoverable under the law.
• Nexus phrases: Some indemnification clauses require a nexus between the indemnifying party's actions and the third-party claim.

Common Exceptions to Indemnification

In addition to these limitations, there are also common exceptions to indemnification. These exceptions may exclude certain types of claims or liabilities from the indemnifying party's obligation to indemnify. Some of the common exceptions include:

• Use of the product in violation of the terms of the agreement or terms of use
• Alteration or modification of the goods by a third party
• Use of the goods with equipment or software not approved by the seller
• Compliance with information, directions, specifications, or materials provided by the buyer or other third parties

Conclusion

Understanding the exceptions to infringement indemnity clauses is essential for both buyers and suppliers. These exceptions provide important limitations on the indemnifying party's obligation to indemnify and help ensure a fair allocation of risk. By carefully reviewing and negotiating these clauses, parties can protect their interests and avoid unnecessary disputes. If you have any questions or need assistance with your commercial contracts, it's always best to consult with a qualified legal professional.