What Does “Indemnify” Mean in a Contract?
To compensate another party for losses, damages, or expenses they incur, essentially agreeing to cover their costs if something goes wrong.
Detailed Explanation
To "indemnify" means to make someone whole - to compensate them for losses they suffer. If you indemnify someone against third-party claims, you're agreeing to pay their legal costs and any damages if they get sued.
Indemnification shifts risk. The indemnifying party takes on financial responsibility for specified situations, even if they didn't directly cause the problem. It's like insurance that one party provides to another.
Example in a Contract
“Contractor shall indemnify and hold harmless Company from and against any and all claims, damages, losses, and expenses arising from Contractor's negligent acts or omissions in performing the Services.”
Why It Matters
Indemnification can expose you to unlimited liability. You're essentially agreeing to write a blank check for certain types of problems. Negotiate to limit what you indemnify against and consider caps on your exposure.
Related Terms
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