Draft an Indemnity Agreement

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Indemnity agreements are an instrumental component of many business contracts. They provide a form of insurance for businesses, individuals, and other entities by protecting them from potential losses or damages that could result from a certain situation. When drafting an indemnity agreement, it is essential to understand the terms and conditions of the agreement and to make sure it is legally binding.

The Genie AI team recommends enlisting the help of a qualified lawyer when creating an indemnity agreement so that all elements are clearly defined and understood by both parties. However, these agreements don’t need to be overly complex; with the right guidance, they can be drafted quickly and easily using our community template library – no account or payment required!

Our Genie AI experts have compiled step-by-step instructions as well as access to our free indemnity agreement templates for those looking for more information on how to protect their interests. So if you’re in need of such protection but don’t know where to start – read on below for some useful advice!

Definitions

Indemnitee: The person or entity receiving the indemnification
Indemnitor: The person or entity providing the indemnification
Mutual indemnification agreement: An agreement between two parties, whereby each party agrees to indemnify the other in the event of a specified event
Scope of indemnification: The extent of protection that the indemnitee is entitled to
Conditions of indemnity: The conditions under which the indemnitee is entitled to receive compensation
Risks: Potential losses or damages that could result from the specified event
Responsibilities: Obligations of the indemnitee under the agreement
Extent of protection: The amount of indemnification that the indemnitee is entitled to receive
Limits of liability: The maximum amount of indemnification that the indemnitee is entitled to receive
Disclaimer of liability clause: A clause stating that the indemnitee is not responsible for any losses or damages that could result from the specified event
Disclaimer of warranties: A statement that the indemnitee makes no representations or warranties as to the accuracy or completeness of any information provided in the agreement
Indirect, incidental, or consequential damages: Losses or damages that are not directly related to the specified event
Timeframe: The start and end date for the agreement
Governing law: The jurisdiction in which the agreement will be enforced
Severability clause: A clause stating that if any part of the agreement is deemed invalid, the remainder of the agreement will remain in effect
Signing and executing the agreement: The action of all parties signing and making the agreement legally binding

Contents

1. Overview of Indemnity Agreement and its Purpose
2. Understanding the Differences between Indemnification and Insurance
3. Identifying the Parties Involved in the Agreement
4. Establishing who is the indemnitee and who is the indemnitor
5. Identifying any third parties involved
6. Drafting the Indemnity Clause
7. Deciding the scope of indemnification
8. Specifying the conditions of the indemnity
9. Creating a mutual indemnification agreement, if necessary
10. Defining the Scope of the Indemnification
11. Identifying the risks associated with the agreement
12. Outlining the indemnitee’s responsibilities
13. Explaining the extent of protection
14. Establishing the Limits of Liability
15. Setting a financial limit on indemnification
16. Determining when the indemnitee is not liable
17. Writing the Disclaimer of Liability Clause
18. Including a disclaimer of warranties
19. Specifying that indemnitee is not responsible for any indirect, incidental, or consequential damages
20. Determining the Timeframe for the Agreement
21. Setting a start and end date
22. Explaining how the agreement can be renewed
23. Establishing the Governing Law
24. Determining the jurisdiction for the agreement
25. Outlining any applicable regulations
26. Including a Severability Clause
27. Specifying what happens if part of the agreement is ruled invalid
28. Signing and Executing the Agreement
29. Ensuring that all parties sign the agreement
30. Notarizing the agreement, if necessary

Get started

Overview of Indemnity Agreement and its Purpose

• Understand what an indemnity agreement is and what its purpose is
• Research and become familiar with the various components of an indemnity agreement
• Understand how an indemnity agreement works - what it covers and what it does not
• Be aware of potential liabilities that could arise from an indemnity agreement
• Understand the differences between indemnification and insurance
• Understand the legal implications of an indemnity agreement and the risks associated with it
• Check you have included the necessary elements in the agreement
• Make sure the agreement is clear and covers all potential risks
• Check if the agreement is legally binding and if it complies with local laws
• Check that the agreement is properly drafted and signed by both parties
  When you have completed the above steps, you can check this off your list and move on to the next step.

Understanding the Differences between Indemnification and Insurance

• Understand the definition of indemnification, which is a contractual promise to hold another party harmless from the consequences of certain actions or events.
• Learn the differences between indemnification and insurance. Indemnification requires a contract between two parties, while insurance is a one-way relationship with a third-party provider.
• Understand the purpose of indemnification and insurance. Indemnification seeks to protect both parties, while insurance seeks to protect only the party that purchased it.
• Learn how indemnification and insurance can be used together. Insurance can provide an extra layer of protection to the indemnified party, while indemnification can provide a contractual obligation to make sure the other party is held harmless.

When you can check this off your list and move on to the next step:

• When you have a clear understanding of the differences between indemnification and insurance and how they can be used together.

Identifying the Parties Involved in the Agreement

• Identify the parties that are involved in the indemnity agreement and make sure they are all in agreement
• Name the parties in the agreement, such as the indemnitee and indemnitor, and determine if they are individuals or organizations
• Make sure that the parties involved are willing and capable of fulfilling the agreement
• Ensure that the parties have legal authority to enter into the agreement
• When all the parties have been identified and agreed to fulfill their roles in the agreement, the step is complete.

Establishing who is the indemnitee and who is the indemnitor

• Determine who the indemnitor and indemnitee are in the agreement.
• The indemnitor is the person who is providing the indemnity and the indemnitee is the person who will be receiving the indemnity.
• Make sure to include the full legal name of each party in the agreement.
• When you have determined who the indemnitor and indemnitee are, you can check this step off your list and continue to the next step.

Identifying any third parties involved

• Review the facts of the agreement and consider if any third parties should be included in the agreement
• Research any applicable laws that may require the inclusion of third parties
• Identify any third parties that should be included in the agreement and make sure to include them in the discussion
• When all third parties that should be included in the agreement have been identified, you can check this step off your list and move on to the next step.

Drafting the Indemnity Clause

• Draft the indemnity clause in the agreement, specifying the parties to the agreement, their rights and obligations, and the scope of indemnity.
• Include a specific provision that sets out the indemnifying party’s obligation to indemnify the indemnified party for losses, liabilities, or damages caused by a breach of the agreement.
• Consider including a provision that requires the indemnifying party to provide a written notice to the indemnified party within a certain timeframe of any potential claims or suits that may arise.
• Ensure the clause clearly states that the indemnifying party is responsible for all legal fees and costs incurred in defending the indemnified party against any claims or suits.
• Include a provision that sets out any limits to the scope of indemnification, such as a maximum amount of liability.
• When finished drafting the indemnity clause, review it for accuracy and make sure all parties involved agree to its terms.
• Once the indemnity clause is finalized, you can check this off your list and move on to the next step.

Deciding the scope of indemnification

• Examine the potential risks associated with the agreement and determine what needs to be included in the indemnification clause
• Consider the potential liabilities the parties involved may be exposed to
• Identify any potential loopholes in the agreement that could lead to disputes
• Research any applicable laws and regulations to ensure the agreement is compliant
• Draft the language of the indemnity clause to clearly specify which parties are indemnifying each other for what
• Make sure to include any additional terms, conditions, and limitations needed to clearly define the scope of the indemnity
• When you are satisfied with the scope of the indemnity, you can move on to the next step: Specifying the conditions of the indemnity.

Specifying the conditions of the indemnity

• Define the actions that trigger the indemnification
• Define the specific events that will require the indemnification
• Specify who will be responsible for paying the indemnified party
• Specify the limits of the indemnification
• Include any applicable exclusions or limitations on the indemnification
• Include a statement that the indemnified party will not be held liable if the indemnifier breaches the agreement
• Include a statement that the indemnifier is responsible for the indemnified party’s legal costs, damages, and losses

Once all the conditions of the indemnity have been specified, you can move on to the next step.

Creating a mutual indemnification agreement, if necessary

• Determine whether mutual indemnification is necessary for the agreement by considering the risks that each party is assuming
• Review existing agreements to ensure that terms of the indemnity agreement are consistent
• Draft the mutual indemnification agreement, taking into account the specific conditions of the indemnity
• Make sure to clearly define the rights, responsibilities, and obligations of each party
• Review and revise the agreement to ensure that it accurately reflects the intent of both parties
• Once the agreement is finished and mutually agreed upon, both parties should sign the agreement
• Once the agreement is signed, both parties should keep a copy of the agreement for their records

How you’ll know when you can check this off your list and move on to the next step:

• Once the mutual indemnification agreement is drafted, reviewed, revised, and signed, you can move on to the next step in the guide.

Defining the Scope of the Indemnification

• Review the agreement to understand the purpose of the indemnification and the parties involved
• Identify the specific events, circumstances, and/or risks that will result in an indemnification obligation
• Define who is responsible for what, and what type of indemnification is needed
• Set out the scope of the indemnification, including any limitations or restrictions
• Make sure to specify what will, and will not, be covered by the indemnification
• Document the agreed-upon terms and conditions of the indemnification in the agreement

Once you have reviewed, identified, and defined the scope of the indemnification and documented the agreed-upon terms and conditions, you can move on to the next step of identifying the risks associated with the agreement.

Identifying the risks associated with the agreement

• Analyze the agreement and identify any potential risks that need to be included in the indemnity agreement
• Consider the agreement from both the indemnifying and the indemnified party’s perspective
• Identify any areas that could cause legal or financial loss and the associated risk
• Consult with legal counsel to ensure all risks and liabilities associated with the agreement are identified
• Once all risks have been identified, you’ll know you can move on to the next step of outlining the indemnitee’s responsibilities.

Outlining the indemnitee’s responsibilities

• List all the obligations of the indemnitee, including any type of responsibility or duty
• Specify the responsibility of the indemnitee in the event of a breach of the agreement
• Describe the consequences of any breach of the agreement, including any financial penalties
• Explain the indemnitee’s responsibility for any legal costs that may arise from a breach of the agreement
• Ensure that all the responsibilities of the indemnitee are clearly defined and mutually agreed upon

You’ll know when you can check this step off your list and move onto the next step when you have listed all the responsibilities of the indemnitee, specified the responsibility of the indemnitee in the event of a breach of the agreement, described the consequences of any breach of the agreement, explained the indemnitee’s responsibility for any legal costs that may arise from a breach of the agreement, and ensured that all of these responsibilities are clearly defined and mutually agreed upon.

Explaining the extent of protection

• Clearly define the scope of the indemnity agreement, including the parties and activities being covered
• Identify the risks that are covered, such as property damage and professional negligence
• Outline the circumstances that would activate the indemnity agreement, such as a breach of contract
• Specify the types of losses that will be indemnified, such as medical expenses
• Make sure that all parties understand the extent of protection provided by the agreement

You can check this step off your list when you have identified and explained all the risks, circumstances, and losses being covered by the indemnity agreement.

Establishing the Limits of Liability

• Identify the parties who are entering into the agreement and the nature of their relationship
• Describe the scope of the agreement, including the type of damages, losses, and liabilities the indemnitee is seeking indemnification from
• Specify the types of activity or conduct that will be covered by the agreement
• Include a clause that clearly states that the indemnitor may not be liable for any damages or losses that are not explicitly stated in the agreement
• Ensure that the agreement is clear and unambiguous and that all relevant information is included
• When finished, review the agreement to ensure that it accurately reflects the parties’ understanding of their respective responsibilities and liabilities

You’ll know you can move on to the next step when you have completed the agreement to the satisfaction of both parties and the agreement has been signed by all parties.

Setting a financial limit on indemnification

• Decide on a specific dollar amount or percentage of total cost that the indemnitor will pay to the indemnitee
• Specify in the agreement if the indemnitor is responsible for attorney fees, court costs, and any other fees associated with the indemnification
• Include language that clarifies that the indemnitor will not reimburse or indemnify the indemnitee for any amounts that exceed the predetermined financial limit
• Make sure to include language stating that the predetermined financial limit is the maximum financial responsibility of the indemnitor

When you have finished this step, you will have determined the financial limit for indemnification and included it in the agreement.

Determining when the indemnitee is not liable

• List the specific circumstances where the indemnitee will not be liable for any damages
• Decide on the wording of the clause and make sure it is clear
• Review the clause to make sure it is legally sound
• Once you’re satisfied with the clause, you can add it to the agreement
• Check off this step and move on to the next step, writing the Disclaimer of Liability Clause

Writing the Disclaimer of Liability Clause

• Start by including a statement that explains the indemnitee is not liable for certain circumstances
• Explain the scope of the liability that is being disclaimed
• Make sure to include language that disclaims all liabilities
• Use clear and concise language to explain which liabilities are being disclaimed
• When you have finished writing the disclaimer of liability clause, you should proofread it to make sure the language is clear and all the necessary liabilities have been disclaimed
• When the clause is complete and you are satisfied with it, you can move on to the next step of including a disclaimer of warranties

Including a disclaimer of warranties

• Write a clause that states that the indemnitee is not providing any warranties and that no warranties are implied
• Specify that the indemnitee will not be liable for any damage related to the indemnitee’s services
• Include a clause that states that the indemnitee will not be held liable for any losses, damages, costs, or expenses of any kind arising from the services provided
• Include a clause that states that the indemnitee disclaims all warranties, express or implied, including but not limited to warranties of merchantability, fitness for a particular purpose, and non-infringement
• Once you have all of these points included in the agreement, you can check this step off your list and move on to the next step, which is specifying that indemnitee is not responsible for any indirect, incidental, or consequential damages.

Specifying that indemnitee is not responsible for any indirect, incidental, or consequential damages

• Identify the legal language to include in the agreement to state that the indemnitee is not responsible for any indirect, incidental, or consequential damages
• Draft the clause in the agreement and include the legal language
• Check the clause against applicable law to ensure its accuracy
• Once the clause is written and checked, you can move on to the next step of determining the timeframe for the agreement.

Determining the Timeframe for the Agreement

• Consult your legal counsel to determine the appropriate timeframe for the indemnity agreement
• Include a start date and end date in the agreement
• Consider adding a clause that allows you to extend the agreement if necessary
• Have the agreement reviewed and signed by both parties
• When the agreement is signed, you will know that you have completed this step and can move on to the next step.

Setting a start and end date

• Establish the start date of the agreement as the date when both parties sign it
• Specify an end date by which the agreement will be considered complete
• Determine the length of the agreement based on the parties’ needs, and include this in the agreement
• Consider including a clause stating that the agreement can be renewed or extended
• Once the start and end date have been established and included in the agreement, you can check this step off the list and move on to the next step.

Explaining how the agreement can be renewed

• Review the language in the agreement to determine if the agreement is automatically renewed or if it needs to be actively renewed.
• If the agreement needs to be actively renewed, consider including a clause that states when the agreement must be renewed, how it should be renewed, and who is responsible for initiating the renewal.
• Once you have determined whether the agreement will be actively or automatically renewed, and whether you need to include a clause that specifically addresses renewal, you can check this step off your list and move on to Establishing the Governing Law.

Establishing the Governing Law

• Research the applicable law that govern the contractual rights and liabilities of the parties to ensure the agreement is valid and enforceable
• Consider which state’s law will apply to the agreement, if the parties are based in different states
• Include language in the agreement that sets forth the governing law, such as “This Agreement shall be governed by and construed in accordance with the laws of [State]”
• Once the governing law is established, you can check this step off your list and move on to the next step.

Determining the jurisdiction for the agreement

• Research the applicable law for the agreement, taking into account the governing law established in the previous step
• Identify which jurisdiction you will use for the agreement
• Consider potential conflicts of law that may arise
• Make sure you are aware of any relevant regulations that must be followed
• When you are satisfied that you have determined the applicable jurisdiction for the agreement, you can move on to outlining any applicable regulations in the next step.

Outlining any applicable regulations

• Research the local laws in the jurisdiction chosen in the previous step
• Consult a lawyer to ensure that the agreement is compliant with all the applicable laws
• Make sure that the indemnity agreement does not conflict with any of the applicable laws
• Include any relevant details about the applicable regulations in the agreement
• Check with a lawyer to make sure that the agreement is legally binding

Once you have finished outlining any applicable regulations and included the relevant details in the agreement, you can move on to the next step of including aseverability clause.

Including a Severability Clause

• Draft a clause that states that if any part of the indemnity agreement is found invalid, the remaining provisions will remain in effect
• Ensure that the clause is clearly written and unambiguous
• Include a clause that states that the agreement will survive any termination, rescission, or expiration of the agreement
• Check that the clause is enforceable in the governing jurisdiction
• Verify that the clause is legally binding and that all of the parties agree to its terms
• When all of the above are complete, move on to the next step of specifying what happens if part of the agreement is ruled invalid.

Specifying what happens if part of the agreement is ruled invalid

• Draft language that specifies that if any part of the agreement is invalid or unenforceable, the invalid portion should be removed and the remainder of the agreement should remain in full force and effect.
• Make sure the language is clear and precise and it’s easy to understand what will happen if any part of the agreement is ruled invalid.
• You’ll know you have completed this step when you have included language that specifies what will happen if any part of the agreement is ruled invalid.

Signing and Executing the Agreement

• Make sure that all parties involved in the agreement have signed the document
• Ensure that each party has a witness to the signing
• Have each party sign and date the agreement in the presence of the witness
• Take a photocopy of each party’s signed and dated agreement
• You can check this step off your list when all parties have signed and dated the agreement and you have a photocopy of each party’s signature.

Ensuring that all parties sign the agreement

• Gather all necessary parties to the agreement and explain its contents
• Have each party sign the agreement and date it
• Ensure that each party has a copy of the signed agreement
• Check that all parties have signed the agreement
• When all parties have signed the agreement, you can check this step off your list and move on to the next step of notarizing the agreement, if necessary.

Notarizing the agreement, if necessary

• Check the agreement to determine if notarization is required
• Find a notary public to complete the notarization process
• Have the parties signing the agreement present a valid form of identification
• Sign the agreement in the presence of the notary
• The notary will then complete the notarization process by affixing their seal
• Check that the notarization has been completed correctly and is valid
• You can check this off your list and move on to the next step once the notary has completed the notarization process.

FAQ

Q: How do I draft an indemnity agreement for a US contract?

Asked by Emily on August 17th 2022.
A: Drafting an indemnity agreement for a US contract is a complex task and it’s important to understand the relevant US laws and regulations that are applicable. The first step is to understand the parties involved in the contract and their roles; the drafter should thoroughly review the contract, as well as any applicable statutes and legal precedents, to ensure that all parties’ interests are protected. The drafter should then draft the agreement according to the applicable laws and regulations, including provisions for notice and dispute resolution, among other things. It is also important to consider any additional provisions that may be required by specific industries or local jurisdictions. After the agreement is drafted, both parties should review it carefully to make sure that it meets all of their needs and accurately reflects the terms of the contract.

Q: Is an indemnity agreement legally binding?

Asked by David on November 22nd 2022.
A: An indemnity agreement is legally binding if it meets certain requirements under applicable law. Generally speaking, such agreements must be in writing, signed by both parties, and must be supported by consideration (i.e., something of value). In addition, they must include specific language that clearly outlines the parties’ respective obligations and liabilities. For example, if one party agrees to indemnify another in the event of a breach of contract, this must be stated explicitly in the agreement. It’s also important to make sure that all of the terms are agreed upon by both parties before signing off on the agreement, as this will help ensure that it is legally enforceable.

Q: What types of clauses should be included in an indemnity agreement?

Asked by Lauren on October 11th 2022.
A: The clauses included in an indemnity agreement will vary depending on the particular needs of each party involved and the type of contract being drafted. Generally speaking, however, common types of clauses include provisions for notice and dispute resolution, limitations on liability, definitions for key terms used in the agreement, and a clause specifying which law will govern interpretation of the agreement. Additionally, depending on the type of contract being drafted, additional clauses may need to be included such as confidentiality clauses or provisions related to intellectual property rights.

Q: Is there a difference between an indemnity clause and an indemnity agreement?

Asked by Katherine on December 3rd 2022.
A: Yes - while they are often used interchangeably, there is a distinct difference between an indemnity clause and an indemnity agreement. An indemnity clause is a single provision within a contract that outlines one party’s (the “indemnitor”) obligation to protect another party (the “indemnitee”) from certain losses or damages resulting from its own actions or inactions. An indemnity agreement, however, is much broader in scope; it is a legal document outlining the rights and obligations of two or more parties with respect to potential losses or damages incurred as a result of certain events or activities (such as breaches of contract). As such, an indemnity clause is part of a larger document (an indemnity agreement), while an indemnity agreement can stand alone as its own legal document.

Q: What happens if I don’t have an indemnity agreement?

Asked by John on July 7th 2022.
A: Without an indemnity agreement in place, you may be exposed to significant financial or legal risks if something goes wrong with your contract or business relationship with another party. Without such protection, either you or your business could be held liable for any losses incurred due to your own negligence or misconduct - even if you were not at fault - which could lead to costly litigation or other legal fees. To avoid such risks, it’s important to draft an effective indemnity agreement which clearly outlines each party’s respective rights and responsibilities in order to protect both sides from potential losses or damages resulting from their actions or inactions.

Q: What are some common mistakes when drafting an indemnity agreement?

Asked by Joshua on January 4th 2022.
A: One common mistake made when drafting an indemnity agreement is failing to clearly define key terms used throughout the document; this can make it harder for either party to understand their respective obligations and liabilities under the contract. Additionally, some drafters fail to consider specific industry-specific regulations or local laws which may apply; this could lead to conflicts down the line if those regulations were not taken into account when drafting the document. Other mistakes include failing to consider potential scenarios which could result in losses or damages for one party (such as negligence), not including dispute resolution clauses within the document itself (which could lead to costly litigation later down the line), not including provisions for notice between parties before taking certain actions (such as terminating contracts), and failing to specify which laws will govern interpretation of the document itself (which can lead to confusion over whose laws apply).

Q: How does EU law affect drafting an indemnity agreement?

Asked by Matthew on June 22nd 2022.
A: EU law has a significant impact on how you draft an indemnity agreement when dealing with contracts involving EU-based entities or individuals; this is because certain EU regulations may apply which could affect your obligations under such agreements. For instance, EU data protection laws require that any data processing activities conducted within EU territory comply with specific requirements regarding data security and privacy - this must be taken into account when drafting data processing clauses within your indemnity agreements in order to ensure compliance with EU law. Additionally, EU consumer protection laws may impose certain obligations upon you when dealing with individuals based within EU territory - these must also be taken into account when drafting your agreements in order to ensure compliance with EU law.

Example dispute

Suing Companies for Breach of Indemnity Agreement

• Plaintiff must demonstrate that the company is in breach of the indemnity agreement.
• Plaintiff must demonstrate that the breach caused them harm or loss.
• Plaintiff must demonstrate that the company is legally liable for the breach.
• Plaintiff must prove that the company’s actions were a direct cause of the harm or loss.
• Plaintiff must provide evidence that the company was aware of the breach and failed to take corrective action.
• Plaintiff must provide evidence that the company had a duty of care towards them.
• Plaintiff must provide evidence that the company acted negligently or maliciously.
• Plaintiff must demonstrate that the damages caused by the breach were foreseeable.
• Plaintiff must provide evidence of the damages suffered due to the breach.
• Plaintiff must provide evidence that the breach caused a financial loss.
• Plaintiff must provide proof of the losses or damages caused by the breach.
• Plaintiff must demonstrate that the company’s actions were a violation of the terms of the indemnity agreement.
• Plaintiff may seek relief from the court in the form of monetary damages.
• Plaintiff may also seek an injunction from the court to force the company to comply with the indemnity agreement.

Templates available (free to use)

General Indemnity Agreement
Hold Harmless Indemnity Agreement
Indemnity Agreement With Private Developer And Compulsory Purchase Order Cpo
Mutual Indemnity Agreement
Release And Indemnity Agreement

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