Additional indemnity provisions: Overview, definition, and example
What are additional indemnity provisions?
Additional indemnity provisions are clauses in a contract that provide extra protections to one party in the event of certain liabilities or claims. These provisions are designed to supplement the basic indemnity obligations outlined in the agreement, extending the scope of indemnity to cover additional situations or risks that may arise during the course of the agreement. Indemnity clauses generally stipulate that one party will compensate the other for losses, damages, or liabilities incurred due to specific actions or events. Additional indemnity provisions may address situations such as third-party claims, intellectual property infringements, or environmental damages, ensuring that one party is not financially responsible for these risks.
Why are additional indemnity provisions important?
Additional indemnity provisions are important because they help define the extent of financial protection available to the parties involved in an agreement. By including these provisions, businesses and individuals can manage potential risks more effectively, ensuring they are not left vulnerable to unforeseen liabilities. These provisions provide clarity on the party responsible for specific risks, which helps prevent disputes and provides financial security in the event that a covered issue arises. They also allow for more tailored protection, addressing unique risks specific to the industry, the agreement, or the transaction at hand.
Understanding additional indemnity provisions through an example
For example, a software development contract may include a basic indemnity provision stating that the developer will protect the client from losses caused by breaches of the agreement. However, the contract might also include additional indemnity provisions specifying that the developer will indemnify the client for any legal claims related to the infringement of third-party intellectual property rights. If the software is found to infringe on a patent owned by another company, the developer would be responsible for covering the costs of defending the claim and any potential damages.
In another example, in a commercial lease agreement, the landlord might agree to indemnify the tenant for damages arising from the landlord’s negligence. However, an additional indemnity provision could state that the landlord is also responsible for indemnifying the tenant for environmental liabilities, such as contamination caused by hazardous substances on the property, even if these issues arise after the tenant has moved in.
An example of additional indemnity provisions clause
Here’s how an additional indemnity provision clause might appear in a contract:
“In addition to the indemnity provided in Section 4 of this Agreement, Party A agrees to indemnify Party B for any third-party claims, losses, or damages arising from the breach of Party A’s representations and warranties regarding the intellectual property rights specified in this Agreement. This indemnity extends to all associated legal fees, costs, and expenses incurred by Party B in defending such claims.”
Conclusion
Additional indemnity provisions are essential for managing the broader risks that may not be fully addressed by a basic indemnity clause. These provisions help ensure that one party is financially protected from specific liabilities or claims that may arise during the life of the agreement. By including additional indemnity provisions, businesses can allocate risks more effectively, providing a more secure and clear framework for resolving potential disputes and claims.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.