When a client hands me a contract to review or asks me to draft a contract on their behalf, one of the first things we discuss is indemnification provisions.
What is an indemnification provision? Indemnification is a fancy way of agreeing to accept losses incurred by the other party. For example, if you own a widget company and you hire an independent contractor salesperson to sell your widgets, you may include an indemnification provision in your contract with the salesperson. Depending on how it’s worded, it’s likely you will ask the contractor to indemnify your widget company for any claims brought by a third party based on the contractor’s own negligence.
Indemnification provisions should be closely scrutinized by an attorney. Even though the language will look very similar in a number of agreements, this is an instance of “the devil is in the details.” Even a slight change in the wording can make a huge shift in who picks up responsibility.
When it comes to indemnification, not understanding the exact terminology can have huge repercussions and cost a lot of money to the side that wasn’t properly informed.