Indemnity Clause Sample: Understanding the Basics and Best Practices

What is an Indemnification Clause?

An indemnification clause is a contractual provision that allocates the risk and responsibility of potential costs or damages from one party to another. It is a common feature in contracts to protect parties from potential legal claims or liabilities that may arise during the course of their business relationship.

Are Indemnification Clauses Enforceable?

Indemnification clauses are generally enforceable as long as they are drafted clearly and meet certain legal requirements. The enforceability of an indemnification clause depends on various factors, including the jurisdiction, the language used, and the specific circumstances of the contract.

Sample Indemnification Clause

Here is a sample indemnification clause:

Party A agrees to indemnify and hold harmless Party B, its affiliates, directors, officers, employees, and agents from and against any claims, liabilities, damages, losses, costs, or expenses (including reasonable attorneys' fees) arising out of or in connection with any breach of this agreement by Party A.

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If you want to draft contracts faster and with confidence, consider using Bloomberg Law. With its extensive database of legal resources and tools, Bloomberg Law can help streamline your contract drafting process and ensure that your indemnification clauses are comprehensive and in compliance with relevant laws.

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Risk Transfer

One of the key benefits of an indemnification clause is the ability to transfer the risk of potential costs or damages from one party to another. By including an indemnification clause in a contract, the parties can allocate the responsibility for potential legal claims or liabilities.

Protection

An indemnification clause provides protection to the indemnitee by ensuring that they are financially protected if they are held liable for certain claims or damages. This can be particularly important in high-risk industries or when entering into contracts with unfamiliar parties.

Clarity

Indemnification clauses help provide clarity and certainty in contractual relationships. By clearly outlining the parties' obligations and responsibilities in the event of a claim or liability, potential disputes or misunderstandings can be avoided.

Peace of Mind

Having a well-crafted indemnification clause in a contract can provide peace of mind to both parties. It allows parties to enter into business relationships with confidence, knowing that they are protected from potential risks and liabilities.

Liability Limitation

Indemnification clauses often include provisions that limit the extent of liability of the indemnifying party. These limitations can include caps on the amount of indemnification, exclusions for certain types of damages, or requirements for the indemnified party to mitigate their losses.

Example of a One-sided Indemnification Clause

Here is an example of a one-sided indemnification clause:

Party A shall indemnify, defend, and hold harmless Party B, its affiliates, directors, officers, employees, and agents from and against any claims, liabilities, damages, losses, costs, or expenses (including reasonable attorneys' fees) arising out of or in connection with any breach of this agreement by Party A.

Example of a Mutual Indemnification Clause

Here is an example of a mutual indemnification clause:

Party A agrees to indemnify and hold harmless Party B, its affiliates, directors, officers, employees, and agents from and against any claims, liabilities, damages, losses, costs, or expenses (including reasonable attorneys' fees) arising out of or in connection with any breach of this agreement by Party A, and Party B agrees to indemnify and hold harmless Party A, its affiliates, directors, officers, employees, and agents from and against any claims, liabilities, damages, losses, costs, or expenses (including reasonable attorneys' fees) arising out of or in connection with any breach of this agreement by Party B.

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