Indemnification Clauses
As a reminder, this is not legal advice; it’s for general education only. It’s not, nor is it intended to be, a subsitute for legal counsel. The law is constantly changing, so don’t rely on anything in this post because I cannot and do not promise accuracy or truthfulness of the contents.
What is Indemnfication?
Indemnification clauses are a standard part of any agreement. I hear it often; a during a meeting to review a contract for negotiation: “what does this mean?” To start, it’s something you want pay close attention to, but don’t panic about it. Indemnification clauses are a regular part of contracts, they just tend to be full of legal terms of art that make them difficult for ordinary people, and some experienced businesspeople, to understand.
“Indemnify,” by definition, is to secure against hurt, loss, or damage or otherwise make compensation for incurred hurt, loss, or damage. The main point in any indemnification clause is to explain under what circumstances indemnification is appropriate. Typically, one party agrees to “indemnify, defend, and hold harmless” the other for some action or inaction under some type of circumstance. In other words, one party is agreeing to protect the other, hire an attorney, and take the blame for whatever happened.
When is Indemnification Important?
These clauses become really important when there’s a third-party lawsuit. If there’s a contract between A and B, where A agrees to indemnify B, and B gets sued by C, B can tell A that they’re invoking the indemnification and A takes B’s place or compensates B after the fact. It’s the most basic form of insurance; just like if you get into a car accident, the insurance company (A) has to indemnify you (B) from the third party (C).
More often, what I personally see, is a Contractor (A) writing code for a Client (B) who then makes the software available to a third party (C). When something goes wrong because of the code that A wrote, B gets sued by C, and B requires A to indemnify them. Indemnification clauses are a way to ensure that the right person takes the blame.
If you’re the Contractor in this situation (A), you want this clause to be very narrow and specific to the services you provide. If you’re the Client in this situation (B), you want this clause to be broader, since you’re the person most likely to get sued. Most indemnification clauses meet somewhere in the middle; like most things, there’s a sweet spot between too much and nothing at all.
Sample Clauses
Sample 1 – More Limited
VIII. Indemnification.
A. Confidential Information. In regards to the disclosure of Confidential Information only, Contractor shall indemnify, defend, and hold Client harmless of any and all claims, demands, losses, damages, liabilities, costs and or expenses of any kind whatsoever incurred by Client which arise out of or in connection with any breach by Contractor of Section V of this Agreement.
B. Intellectual Property. In regards to the use of any Intellectual Property or related creations as described in Section VI of this Agreement only, Contractor shall indemnify, defend, and hold harmless Client against any claim, dispute, or controversy arising out of Client’s use of any materials or intellectual property as described in Section VI.
Sample 2 – More Broad
IX. Indemnification.
The Contractor shall indemnify and hold harmless the Client from and against any and all claims, losses, liabilities or damages (including reasonable attorney’s fees and other related expenses) arising from or in connection with the performance of the Contractor’s obligations under this Agreement; provided, however, that the Contractor’s obligation under this Section IX shall be reduced to the extent that the claim against, or the loss, liability or damage experienced by the Client, is caused by or is otherwise directly related to the Client’s willful misfeasance, bad faith or negligence, or to the reckless disregard of its duties under this Agreement.
Sample 3 – Website/App Terms Version
10. Indemnification.
In addition to any other indemnifications stated in these Terms of Use, you agree to indemnify, defend, and hold harmless the Company and its affiliates, vendors, licensors and their respective owners, directors, officers, employees, agents, subsidiaries, representatives, successors and assigns from and against all claims, demands, liabilities, suits, actions, judgments, awards, damages, losses, costs and expenses, including attorneys' fees, arising out of, related to, or resulting from
any action taken using your or your Authorized Users' Accounts, user IDs, passwords or other access credentials,
your or your Authorized Users' use or non-use of the Site or Services;
your or your Authorized Users' noncompliance with or breach of these Terms of Use;
your or your Authorized Users' use of third-party services, including products, links, advertisements, or tools; and
your or your Authorized Users' violations of any third-party rights, including any patient or donor privacy or healthcare rights or any third-party intellectual property rights.
If you are a client working with me, you may notice that I use some variation of these provisions in your contract. That is because I wrote them, and as such, I am the owner of the copyright in them. Please don’t steal them. Ask for permission before using my stuff; I’m always happy to connect with small businesses and new attorneys and provide nuggets of wisdom.
