Defense of claims: Overview, definition and example
What is defense of claims?
Defense of claims refers to a party’s obligation to defend another party against third-party claims, demands, or lawsuits arising from specific circumstances outlined in a contract. This obligation is often included in indemnification provisions, where one party agrees to cover legal costs, provide representation, and protect the other party from liability related to certain claims.
This clause ensures that the party assuming the defense takes responsibility for managing legal proceedings and minimizing financial or reputational harm to the other party.
Why is defense of claims important?
Defense of claims is important because it allocates responsibility for legal disputes and ensures clarity about which party must bear the burden of defense. For the indemnified party, this clause provides protection from the costs and effort of handling lawsuits or claims related to the indemnifying party’s actions.
For the indemnifying party, it limits uncertainty by defining the scope of their obligations and allows them to control the defense strategy. This clause is critical in contracts where one party’s actions or products might expose another to legal risk, such as supplier agreements, licensing deals, or employment contracts.
Understanding defense of claims through an example
Imagine a software company licenses its technology to a client. A third party files a lawsuit claiming the software infringes on their intellectual property rights. The licensing agreement includes a defense of claims clause requiring the software company to defend the client against such lawsuits. The software company assumes responsibility for the legal proceedings, including hiring legal counsel and covering all associated costs.
In another example, a construction contractor agrees to defend a property owner against any claims arising from workplace injuries during a building project. If an employee sues the property owner for negligence, the contractor must handle the defense, as outlined in the agreement, and ensure the owner is not financially or legally burdened by the claim.
An example of a defense of claims clause
Here’s how a defense of claims clause might appear in a contract:
“The Indemnifying Party agrees to defend, indemnify, and hold harmless the Indemnified Party from and against any and all claims, actions, or demands brought by third parties arising from or related to [specific cause]. The Indemnifying Party shall assume full responsibility for the defense, including hiring legal counsel and covering all associated costs, provided that the Indemnified Party gives prompt notice of the claim and cooperates fully in the defense.”
Conclusion
The defense of claims clause is a key element in contracts that involve potential third-party liabilities. It ensures clarity about which party bears responsibility for managing and covering legal disputes, protecting the indemnified party from undue financial or reputational harm. Including a well-drafted defense of claims provision in contracts promotes accountability, transparency, and fairness while reducing the risk of disputes between the contracting parties.
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.