An indemnity clause is a contractual provision in which one party agrees to compensate the other party for a specified loss or harm that the other party might incur. For example, a clause might state that a tenant must reimburse a landlord for fines or damages the landlord incurs, or a contract might require a supplier to reimburse a customer for expenses caused by the supplier’s breach.
The primary purpose of an indemnity clause is to shift risks from one party to the other. A party providing indemnification is essentially acting as an insurance company for the other party. Any costs, expenses, or fees paid by the “indemnitee” resulting from the actions of the “indemnitor” shall be reimbursed by the indemnitor.
Beware of signing a contract with an indemnification clause that is one-sided. If you need help in drafting or reviewing your contracts, please contact us and speak to one of our professionals.