Indemnification

Common pitfalls

• 1.Scope is imbalanced — one party indemnifies broadly while the other indemnifies narrowly or not at all.
• 2.Cap is missing — uncapped indemnity exposes the indemnitor to unlimited liability. Most mature contracts cap at the fees paid or a multiple.
• 3.Defense obligation is unclear — who controls the litigation, who picks counsel, what happens if the parties disagree about settlement.
• 4.Survival period after termination is absent — indemnities typically need to outlast the contract itself.
• 5.Carve-outs are missing — indemnitee’s own negligence, fraud, or wilful misconduct usually should not be covered.

Frequently asked questions

What is the difference between indemnification and warranty?

A warranty is a promise that something is true (the software works as documented). An indemnity is a promise to pay for losses if something specified happens. A breach of warranty may trigger an indemnity, but they are distinct clauses with distinct remedies.

Does "hold harmless" mean the same as "indemnify"?

In most jurisdictions they are functionally equivalent and often used together ("indemnify and hold harmless"). Some drafters treat "hold harmless" as narrower — only meaning the indemnitor will not sue — but the dominant modern interpretation treats them as synonymous.

Can an indemnity cover the indemnitee’s own negligence?

In some jurisdictions yes, if the clause is explicit and unambiguous. In others, courts refuse to enforce such indemnities or require very specific wording. This is a jurisdiction-sensitive question — worth flagging to a local lawyer.