Indemnity

An indemnity is a promise by one party to pay for losses the other suffers if a specified event happens. In commercial contracts, indemnities usually cover claims brought by third parties, such as a claim that the work infringes someone's copyright.

Indemnities are often drafted to pay out directly, pound for pound, rather than leaving the parties to argue about what loss was caused. That makes them valuable to the party receiving them and a real risk for the party giving them, especially where the indemnity has no cap.

Because of that, indemnities are commonly negotiated. Typical points are which events are covered, whether the indemnity is one-way or mutual, whether it sits inside the liability cap, and who controls the defence of a claim.