Indemnity Wording Example: Understanding Indemnification Clauses in Contracts

When it comes to business contracts, one important aspect to consider is indemnification. An indemnification clause allocates the risk and expense in case of one party's breach, default, or misconduct. In this blog post, we will explore different indemnity wording examples and provide a comprehensive guide to understanding indemnification clauses in contracts.

What is an Indemnification Clause?

An indemnification clause is a contractual provision that shifts the responsibility of potential costs and risks from one party to another. It outlines the obligations and liabilities of each party in case of a dispute or loss. The party providing the indemnity (the indemnitor) agrees to compensate the other party (the indemnitee) for any damages, losses, or expenses incurred due to specific events or circumstances.

Example: Indemnity Clause in a Technology Agreement

Let's take a look at an example of an indemnification clause in a technology agreement:

12.2 Indemnity. The Company shall indemnify, defend, and hold harmless the Ramot Indemnitees against any liability, damage, loss, or expense (including reasonable attorneys fees and expenses of litigation) incurred by or imposed upon any of the Ramot Indemnitees in connection with any third party claims, suits, actions, demands or judgments (“Claims”) under any theory of liability (including without limitation actions in the form of tort, warranty, or strict liability) resulting from or arising out of the practice or use of any of the Ramot Technology or Joint Technology (or any part thereof) by the Company, its Affiliates or any of their Sublicensees, or concerning any product, process, or service that is made, used, or sold pursuant to any right or license granted by Ramot to the Company under this Agreement, other than in the event of a Claim resulting from or arising out of a breach of the representations and warranties by Ramot under this Agreement by Ramot or any fraud or intentional misconduct by any of the Ramot Indemnitees.

In this example, the Company agrees to indemnify and hold harmless the Ramot Indemnitees (the indemnitees) against any liability, damage, loss, or expense resulting from the practice or use of the Ramot Technology or Joint Technology. This clause specifies the scope of indemnification and the circumstances under which the indemnitor is obligated to provide compensation.

Types of Indemnification Clauses

Indemnification clauses can vary depending on the specific needs and circumstances of the parties involved. Here are some common types of indemnification clauses:

1. One-Way Indemnification Clause

A one-way indemnification clause is a provision where only one party bears the responsibility for indemnifying the other party. In this type of clause, the indemnitor provides indemnification to the indemnitee for specific events or circumstances, such as breaches of contract or third-party claims.

Example:

1. Indemnification -- The basic one-way Sponsor indemnity, where Sponsor wrote the protocol and includes liability for claims arising from our performance of our obligations and Sponsor's use of the study results.

In this example, the Sponsor (indemnitor) indemnifies the other party (indemnitee) for claims arising from the Sponsor's performance of obligations and use of study results.

2. Mutual Indemnification Clause

A mutual indemnification clause is a provision where both parties agree to indemnify and hold harmless each other. This type of clause is often used in situations where both parties may be exposed to potential risks or liabilities.

Example:

2. Indemnification -- A standard mutual indemnity, where University indemnifies Sponsor with respect to negligence, and Sponsor indemnifies University with respect to University's performance of the protocol and use of the results of the study.

In this example, both the University and Sponsor agree to indemnify each other for specific events, such as negligence or breaches of protocol.

3. Third-Party Indemnification Clause

A third-party indemnification clause is a provision where one party agrees to indemnify the other party for any claims or losses brought by a third party. This type of clause is commonly used in contracts where one party's actions or products may result in third-party claims or liabilities.

Example:

Example: Third Party Indemnity Clause

In this example, Party A agrees to indemnify Party B for any claims or losses brought by a third party due to Party A's actions or products.

4. Intellectual Property Indemnification Clause

An intellectual property indemnification clause is a provision where one party agrees to indemnify the other party for any claims or losses related to intellectual property infringement. This type of clause is often included in agreements involving the use or licensing of intellectual property.

Example:

Example: Intellectual Property Indemnification Clause

In this example, Party A agrees to indemnify Party B for any claims or losses related to intellectual property infringement arising from Party A's use or licensing of the intellectual property.

5. Indemnify and Hold Harmless Clause

An indemnify and hold harmless clause is a provision where one party agrees to indemnify and hold harmless the other party from any claims, damages, or losses. This type of clause provides broader protection to the indemnitee, as it covers not only indemnification but also the duty to hold the indemnitee harmless.

Example:

Example: Indemnify and Hold Harmless Clause

In this example, Party A agrees to indemnify and hold harmless Party B from any claims, damages, or losses arising from Party A's actions or products.

How to Draft an Indemnification Clause

When drafting an indemnification clause, it is essential to consider the specific circumstances and risks involved. Here are some key considerations:

1. Clearly Define Indemnifiable Events

Clearly define the events or circumstances for which indemnification will apply. This can include breaches of contract, third-party claims, intellectual property infringement, or other specific risks.

2. Specify the Scope of Indemnification

Specify the scope of indemnification, including the types of damages or losses that will be covered. This can include legal fees, settlement costs, or other expenses incurred as a result of the indemnifiable event.

3. Allocate Responsibilities

Clearly allocate responsibilities between the indemnitor and indemnitee. Determine who will be responsible for providing indemnification and under what circumstances.

4. Consider Insurance Requirements

Consider whether insurance coverage is necessary or recommended to mitigate potential risks. Include provisions regarding insurance requirements and coverage limits, if applicable.

5. Consult with Legal Counsel

Consult with legal counsel to ensure that the indemnification clause is enforceable and complies with applicable laws and regulations.

Are Indemnification Clauses Enforceable?

Indemnification clauses are generally enforceable if they are drafted clearly and meet the requirements of applicable laws. However, the enforceability of an indemnification clause may vary depending on the jurisdiction and specific circumstances of the case.

It is important to consult with legal counsel to ensure that the indemnification clause is properly drafted and complies with relevant laws and regulations.

Conclusion

An indemnification clause is a crucial component of a well-drafted contract. It allocates the risk and expense in case of one party's breach, default, or misconduct. By understanding different indemnity wording examples and considering key considerations when drafting an indemnification clause, parties can protect themselves from potential risks and liabilities.

Remember, it is always recommended to consult with legal counsel to ensure that the indemnification clause is tailored to the specific needs of the parties and compliant with applicable laws.