Liabilityhigh Risk Severity

Indemnification Clause

Indemnification is one of the highest financial risks in any contract. An uncapped or one-sided indemnity can force a small company or contractor into bankruptcy to defend a lawsuit filed against a giant corporate partner.

Plain-English Definition

An indemnification clause (also called a 'hold harmless' provision) is a contractual agreement where one party promises to pay for legal costs, damages, or settlements incurred by the other party from third-party lawsuits.

Standard vs. Protective Language

Compare typical counterparty-favored phrasing against our attorney-approved balanced alternative.

Typical Aggressive LanguageFavor: Counterparty
Vendor agrees to defend, indemnify, and hold harmless Customer, its officers, directors, and employees from and against any third-party claims, liabilities, losses, or expenses (including reasonable attorneys' fees) arising out of Vendor's breach of this Agreement, gross negligence, or infringement of intellectual property rights.

⚠ Often leaves you exposed to uncapped liabilities or third-party indemnities without defense control.

LegalGPT Safer SubstituteRecommended
Each party ('Indemnifying Party') agrees to defend and indemnify the other party from and against third-party claims arising solely from the Indemnifying Party's gross negligence, willful misconduct, or material breach, subject to the aggregate liability cap set forth in Section [Limitation of Liability]. The Indemnifying Party shall have sole control over defense and settlement.
Balanced mutual liability & defense control

Dangerous Red Flags in this Clause

If you spot any of these phrases or omissions in your contract, pause and propose counter-language immediately:

Unilateral indemnification where only you indemnify the other party
Indemnifying for ordinary negligence rather than gross negligence or willful misconduct
Indemnifying for claims arising from the other party's own actions or instructions
No control over the legal defense or settlement negotiations
Indemnity claims exempted from the contract's overall Limitation of Liability cap

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Frequently Asked Questions

Should indemnification be mutual or one-way?

In almost all commercial contracts, indemnification should be mutual. If you are required to indemnify the counterparty for IP infringement or breach, they should reciprocate by indemnifying you for claims caused by their platform, staff, or materials.

Is indemnification capped by limitation of liability?

By default, counterparties often try to carve out indemnification from liability caps. Best practice for vendors and contractors is to ensure indemnity is either subject to the general cap or a negotiated 'super-cap' (e.g. 2x annual contract value).

Agreements Containing This Clause

Commercial and employment contracts where the Indemnification Clause is routinely included and negotiated.

Related Companion Clauses

When redlining this provision, review these related clauses to prevent unintended liability shifts.