An indemnification clause in a contract means one party agrees not to hold the other liable for damages, liabilities, and losses. It’s important to understand the clause’s language and when it can be enforced. Accepting the clause only applies to specific situations, and legal action can still be taken if one party is negligent or breaches the contract.
An indemnification clause is a clause in a contract indicating that one party agrees not to hold the other liable for damages, liabilities and losses that may be incurred. In a one-sided version, only one party agrees, while in a reciprocity clause, both parties to the contract subscribe to the clause. It’s important for people to scrutinize all contracts to confirm they contain no surprises, and if a contract contains a harmlessness clause, people should make sure they understand when and how the clause can be enforced.
In a simple example, a homeowner might agree not to hold a contractor liable if they are unable to complete the work due to circumstances beyond their control. These could include weather conditions which slow down work, supplier failures which block the process making it impossible to obtain materials and so on. In this case, the contractor cannot be held responsible for problems experienced by the homeowner due to a construction delay; for example, the homeowner cannot sue to force the contractor to pay for a hotel room if the homeowner is forced to stay at a hotel due to slowed or interrupted work.
The language surrounding the clause is usually situation specific and describes the circumstances it covers. If the language appears unclear or ambiguous, this should be discussed before signing the contract. In the example above, for example, a homeowner wants to make sure they have legal options if a contractor simply leaves work or starts showing up to work late repeatedly, causing work to slow down or stop. Consequently, it would be necessary to confirm that the indemnification clause does not apply to circumstances which the policyholder can control.
Accepting a clause does not mean that someone has no legal options if there is a problem with the contract. It applies only to the specific situations that are stated. If one party is negligent, breaches contract, or engages in other illegal activity, the other party may take action. The purpose of an indemnity clause is to relieve individuals of liability in the event of a clearly defined problem which could foreseeably arise during the completion of the contract or which could be an obstacle to its performance.
Protect your devices with Threat Protection by NordVPN
