Free Indemnification Agreement Templates (MS Word)

fillable indemnification agreement

An indemnification agreement is a type of agreement that for any loss, damage or burden holds a company or business harmless. The term indemnification refers to compensation for damage done or loss caused by someone.

What is indemnity?

It’s important to understand what indemnity truly means before making your own indemnification agreement. Indemnity refers to the following;

  • To individual’s duty to rectify the damages, losses or liabilities sustained by another party.
  • To hold harmless one person’s actions.
  • To claim reimbursement or compensation for losses or damages, it refers to the right of the injured party.
  • To damages compensation as a result from the actions of another person.
  • From losses and damages, to legal exemption.

The purpose of an indemnification agreement:

To understand what an indemnification agreement is, you have to know the meaning of indemnity that typically means “to hold harmless.” It means one party holds another harmless for some damage or loss.

Furthermore, the businesses that involve construction work commonly use this agreement. There are also some other businesses that ask their employees to sign such agreements in order to protect themselves against potential lawsuits. Rental Car Companies who want to protect themselves against lawsuits from any accidents are widely used these agreements.

The parties involved in an indemnification agreement:

Every state has its own indemnification forms but all forms contains the same basic information. You have to describe the following two parties in the indemnification letter;

  • The indemnitee: the individual who wants protection.
  • The indemnifier: the individual who wants or promises to minimize harm to the indemnitee.

The indemnification agreement may also explain the consideration. In addition to this, the amount of money that you will use to obtain the agreement should be included in it. An indemnification clause that is stated in certain terms under which you will hold the indemnitee harmless. The legal language for the laymen used here can be fairly complex.

There are also exclusions that you have to add and explain. The fault or negligence of the indemnitee is the most common exclusion. In some case, the indemnitee is legally proven as negligent and is at fault for some reason, then the indemnification wouldn’t be applied and the indemnitee can get sued as well.

The provisions of an indemnification agreement:

When either party has committed a breach of contract, default, or misconduct, an indemnity agreement sample distributes risk and expense. The agreement moves the cost from one party to another as indemnification means “to hold harmless.’

In the case of mutual indemnification, if there be any incurred losses arising from any breach from the indemnifying party, both parties will be in agreement to provide compensation to the other. Most people consider this safer in comparison to one-way indemnification where only one party gives the indemnity.

However, the main objective or advantage of an indemnification provision is to provide protection to the indemnified party against any losses from the claims created by third parties. This indicates that in crafting indemnification provisions, you should carry out heavy negotiations not to mention that these are also litigated.

Types of clauses in indemnification agreements:

An indemnification agreement is a written document that establishes the transfer of financial risk to a third party. The agreement includes all the parties involved in the agreement, the situations mentioned, and the party who shoulders the risk. Generally, a company would accept the liability associated with a specific service or product if it indemnifies another company. You can find the indemnification clause in the following;

  • Commercial contracts
  • Leases
  • Legal contracts
  • Licensing agreements
  • Loan agreements
  • Supply agreements

For risk upon a company or person, the inclusion of these clauses will place the legal responsibility. By increasing the degree of a risk that a company accepts, there are can also be cases where an indemnity clause creates more risk.

Since indemnity clauses take into account unforeseen accidents, they only allow a specific degree of risk. In the indemnification agreement, you can include the following indemnification clauses;

Broad form indemnity

The broad form indemnity clause holds the indemnifier responsible due to his/her negligence and any negligence of a third party. It can make them accountable for the negligence of the indemnitee too. The indemnitee, in some states, isn’t allowed to transfer damages that they caused on their own or of the indemnifier’s intended misconduct.

Intermediate form indemnity

This indemnifies a party due to its negligence until it was fully their fault. In this type of indemnity, the phrase “…. caused in part” is almost always included. Additionally, it is no longer a broad form indemnity as the term “whole” isn’t included. Since this type of indemnity renders the owner harmless from claims caused by their own negligence so it is the most common method used in the construction businesses. It sets an all-or-nothing indemnification in its most basic sense.

Comparative form clause

This type of indemnity clause needs a comparison of the negligence. According to inclusion of this clause, the indemnified is responsible for any losses caused by their proper actions. Common law principals that are commonly accepted in the USA identify the level of responsibility. Here, for negligence, the indemnifier will not take responsibility that the indemnitee commits directly.

By the conditions outlined in the agreement, you can identify how much indemnity one party must shoulder on behalf of the other party. An effective indemnification should indicate the types of indemnity needed depending on the situation and the transaction. You may also like independent contractor agreement templates.

Conclusion:

In conclusion, an indemnification agreement is a contractual document between two parties. In this agreement, one party agrees to pay for any potential losses or damages that the other party caused. Indemnity, in simple words, refers to compensation for damages and loss.

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