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Can Any Agreement Include an Indemnification Clause?

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  • Written By: M. Maree
  • Edited By: Lucy Oppenheimer
  • Last Modified Date: 02 December 2016
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    Conjecture Corporation
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An indemnification clause is a section in a contract that protects one or more of the parties to the contract from liability for some specified type of loss or damage arising out of the contract. Any agreement can include an indemnification clause, also known as a hold harmless clause, but whether that clause will be enforceable, depends on the relevant facts of the particular case and the laws of the governing jurisdiction. In some cases, an indemnification clause will be unenforceable because of the way it's written or because it conflicts with some other aspect of a contract. Other times, an indemnification clause will be unenforceable because it attempts to indemnify against a types of damages that prohibited from being protected against. For example, in the United States, one cannot indemnify against death or personal injury.

Indemnity clauses are commonly used in business as a tool of risk management. In fact, they're often considered essential to good corporate governance. As a result, they exist in many contracts, including the boilerplate language of consumer agreements. As is the case with any contract or provision within a contract, attorneys and other legal professionals recommend that anyone preparing to sign a contract carefully review the entire contract, including any indemnification clauses.

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In general, to be binding, an indemnification clause must meet several legal requirements. Clarity is the primary requirement. The clause should include unique language that identifies the rights and obligations of each party to the contract. This is also helpful in potentially preventing future disputes or civil claims. The limits and exceptions that are not protected, if any, should also clearly be described.

While any kind of agreement from a rental agreement to a purchase agreement for a product or service can include an indemnity clause, whether it's binding depends on the laws of the applicable jurisdiction. A court can render an indemnification clause unenforceable or limit its interpretation for a variety of reasons including a lack of clarity or definiteness and unconscionablity.

Indemnification clauses are usually unenforceable if they involve illegal subject matter. Some jurisdictions prohibit the indemnification of certain types of loss. In the US, one cannot indemnify against death or personal injury. That is, party A cannot agree to indemnify party B if party A suffers personal injury or dies as a result of activity that is the subject of the contract. Some jurisdictions also prohibit indemnification clauses that protect oneself from the damages that result from one's own negligent or grossly negligent acts.

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