What does indemnity mean in legal terms?
To indemnify another party is to compensate that party for losses that that party has incurred or will incur as related to a specified incident.
What does indemnification clause mean?
Indemnification clauses are clauses in contracts that set out to protect one party from liability if a third-party or third entity is harmed in any way. It’s a clause that contractually obligates one party to compensate another party for losses or damages that have occurred or could occur in the future. indemnify.
What is indemnity in law of contract?
The word indemnity means security or protection against a financial liability. It typically occurs in the form of a contractual agreement made between parties in which one party agrees to pay for losses or damages suffered by the other party.
Are indemnification clauses enforceable?
Indemnification provisions are generally enforceable. There are certain exceptions however. Indemnifications that require a party to indemnify another party for any claim irrespective of fault (‘broad form’ or ‘no fault’ indemnities) generally have been found to violate public policy.
Why is an indemnification clause important?
The most important part of an indemnification clause is that it protects the indemnified party from lawsuits filed by third parties. This protection is important because damaged parties are still able to pursue compensation for their losses even if this clause isn’t in the contract.
Are indemnity clauses enforceable?
Are indemnity forms legal?
Generally, an indemnity agreement is enforceable if a person freely and voluntarily agreed to it, except if it is against public policy. Public policy states a person may not contract out of gross negligence or wrongful misconduct.
Should indemnity clauses be mutual?
Mutual indemnification provisions are meant to provide both parties with a sense of security. In other words, no matter which party breached the contract, the breaching/indemnifying party would foot the legal bills.
Can indemnification be capped?
An indemnity cap is one typical limitation on indemnity liability in private company M&A transactions. While a cap is commonplace in M&A agreements, so are exceptions to the cap (i.e., situations where the cap on indemnity does not apply).
How do you enforce an indemnity clause?
Tips for Enforcing Indemnification Provisions
- Identify Time Periods for Asserting Indemnification Rights.
- Provide Notice in a Timely Fashion.
- Notify All Concerned Parties.
- Understand Limitations on Recovery.
- Exclusive Remedy.
- Scope of Damages.
- Claims Process/Dispute Resolution.
What does indemnification mean in a contract?
If you are the party covered by this clause, it means that the other contractual party is promising to compensate you if their actions cause you to suffer a loss. For example, they may commit an action that results in you being sued by a third-party. The words defend, hold harmless, and indemnify must be included in an indemnification clause.
What does indemnity mean in law?
Indemnity is one’s duty to make good the liabilities, damages, or losses that are incurred by another party. The general meaning of indemnity is to hold harmless — one party holds the other harmless for damage or loss.
What does it mean to indemnify the second party?
By indemnifying the second party, the first party, in effect, agrees to pay for or make good any loss or damages that may occur. In other words, by agreeing to make the indemnitee (the party that receives, or benefits from, the indemnity) NOT liable, the indemnitor (the party granting the indemnity) effectively agrees that he/she IS liable.
What are the limitations of an indemnification clause?
Another aspect of the indemnification clause to keep in mind is the duration of liability. Define exactly how many years the indemnity can be enforced before becoming invalid. The limitation period in relation to an indemnity clause starts from the date of which the indemnifier refuses to honor the indemnity.