What does it mean to indemnify someone?

Is it good to be indemnified?

Why Indemnification is Important. Indemnification can be important to both parties entering into a transaction or contractual agreement. If you are granting the indemnity, the provision of reasonable protection against liability may be essential to you being able to do business with the other party.

What is the purpose of an indemnity clause in a contract?

An indemnification provision allocates the risk and expense in the event of a breach, default, or misconduct by one of the parties. An indemnification provision, also known as a hold harmless provision, is a clause used in contracts to shift potential costs from one party to the other.

What are the two purposes of indemnity?

There are two parties in an indemnity contract, including the indemnitee and indemnifier. The indemnitee is the party that is seeking protection, whereas the indemnifier is the one promising to hold harmless.

Is an indemnity legally binding?

When the term indemnity is used in the legal sense, it may also refer to an exemption from liability for damages. Indemnity is a contractual agreement between two parties. In this arrangement, one party agrees to pay for potential losses or damages caused by another party.

What does signing an indemnity mean?

In an indemnity agreement, one party will agree to offer financial compensation for any potential losses or damages caused by another party, and to take on legal liability for whatever damages were incurred. The most common example of indemnity in the financial sense is an insurance contract.

Do indemnity clauses hold up in court?

Court will not enforce an indemnification provision that indemnifies an indemnitee for its own negligence “unless the intention of the parties is clearly and unambiguously expressed.” Courts first look for specific language in the contract that address the fault or negligence of the indemnitee.

What is indemnity example?

An example of an indemnity would be an insurance contract, where the insurer agrees to compensate for any damages that the entity protected by the insurer experiences.

What is the difference between liability and indemnification?

Indemnification usually transfers risk between the parties to the contract. Limitation of liability prevents or limits the transfer of risk between the parties.

Will indemnify and hold harmless?

This definition, while suggesting a relationship with "indemnify", supports the view that the words "hold harmless" involve a limitation or exclusion of liability while "indemnify" involves reimbursing another for a loss suffered.

How does an indemnity agreement work?

Put simply, indemnity is a contractual agreement between two parties, where one party agrees to pay for potential losses or damages claimed by a third party. For example, say you own a shopping centre, and you hire a snow removal service to clear your parking lot in the winter.

Who signs an indemnity agreement?

The two parties of the contract will sign the indemnification agreement. This means the indemnitee, or the person/business/company providing the good/service, will sign the document. The indemnifier, or the person/business/company receiving the good/service, will sign the document as well.

Who is usually the protected party when indemnification is used?

Indemnification, also referred to as indemnity, is an undertaking by one party (the indemnifying party) to compensate the other party (the indemnified party) for certain costs and expenses, typically stemming from third-party claims.

What is the difference between indemnity and indemnify?

There is a distinction. Indemnity = (1) security or protection against contingent hurt, damage, or loss; or (2) a legal exemption from the penalties or liabilities incurred by any course of action. Indemnification = the action of compensating for actual loss or damage sustained; the payment made with this object.

What does it mean to indemnify and hold someone harmless?

The prevailing interpretation is that “hold harmless” and “indemnify” are synonymous. However, under the minority view, “hold harmless” requires payment of both actual losses and potential liabilities, while “indemnify” protects against incurred losses only.

How do you enforce an indemnity clause?

Should you agree to indemnification clause?

Indemnification clauses are exceedingly common in many contracts, but what you should pay close attention to is the scope of your indemnification agreement. Generally, you should only agree to pay for losses arising from your own actions and not the other party's actions.

Why is an indemnity better than breach of contract?

An indemnity is a primary obligation; it does not depend on having to prove a breach of a contractual obligation. This offers a number of advantages over bringing a damages claim for a breach of contract: An indemnity will typically be triggered by losses being incurred, without the need to prove any "fault".

Is an indemnity a debt claim?

Looking at various cases, it is clear that indemnities fall into two separate categories: indemnities for debt claims; and. indemnities for damages claims.

Does indemnification mean you can't sue?

If the indemnification provision is found to be valid, this usually means that the party has surrendered their right to damages in a lawsuit. However, if the indemnification provision actually wasn't valid, then a lawsuit can actually be filed against the other party.

What are the things that must be specified in an indemnity clause?