An indemnification clause requires one party to compensate the other for certain losses, damages, or legal costs. These clauses can expose you to significant financial risk if not carefully reviewed.
“Contractor shall indemnify, defend, and hold harmless Company and its officers, directors, employees, and agents from and against any and all claims, damages, losses, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to Contractor's performance of services under this Agreement.”
This means if anyone sues the company for anything related to your work, you have to pay all their legal bills and any damages - even if it wasn't really your fault. This is a one-sided clause that puts all the risk on you.
One-sided indemnification without mutual protection
Covers claims caused by the other party's negligence
No cap on liability exposure
Includes 'arising out of or relating to' language that's extremely broad
Requires payment of attorneys' fees regardless of outcome
Indemnification means reimbursing someone for losses after they occur. Hold harmless means preventing liability from attaching in the first place. In practice, contracts often use both terms together for maximum protection.
Yes, liability caps are commonly negotiated. Try to cap indemnification at the contract value, your insurance limits, or a specific dollar amount. This limits your maximum exposure regardless of the actual damages.
It depends on the language. 'Indemnify and defend' typically means the indemnifying party pays legal fees during the case. 'Indemnify' alone may only cover damages after judgment. Check for specific language about attorney's fees.
Indemnification is typically triggered by third-party claims (lawsuits from others). Look at what events are covered—breaches of the contract, negligence, IP infringement, etc. 'Arising out of or relating to' language is extremely broad.
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A limitation of liability clause caps the maximum amount one party can recover from the other for damages. While these clauses provide predictability, they can leave you without adequate recourse if things go wrong.
A termination clause defines how and when a contract can be ended by either party. Understanding these terms is crucial - they determine your ability to exit a bad situation and what happens when you do.
A governing law clause specifies which jurisdiction's laws will interpret the contract and where legal disputes must be handled. This can significantly impact your rights and the cost of resolving disputes.