Indemnification for expenses of a party who is wholly or partly successful: Overview, definition, and example
What is indemnification for expenses of a party who is wholly or partly successful?
Indemnification for expenses of a party who is wholly or partly successful refers to a provision in a contract or agreement where one party agrees to reimburse the other party for certain costs and legal expenses incurred in defending themselves or pursuing a claim, even if the party is only partially successful in their legal efforts. This typically occurs when a party involved in litigation or arbitration has won a portion of the claims or issues but may not have achieved full success.
In cases where the party is "wholly successful," they may be entitled to full reimbursement for their legal fees and expenses. However, if the party is "partly successful," they may be entitled to reimbursement for a proportionate share of the expenses incurred, based on the success achieved.
Why is indemnification for expenses of a party who is wholly or partly successful important?
Indemnification for expenses of a party who is wholly or partly successful is important because it ensures fairness in legal disputes. Without this provision, a party that prevails in a legal matter may still be burdened with significant costs, potentially making it less appealing to pursue a claim or defend a case. By offering indemnification, the contract encourages parties to enforce their rights and pursue legitimate claims or defenses without the fear of incurring excessive costs.
This provision can also help allocate the financial burden of legal disputes more equitably between the parties involved, ensuring that one party does not disproportionately bear the financial impact of the legal process.
Understanding indemnification for expenses of a party who is wholly or partly successful through an example
Imagine two companies, Company A and Company B, are involved in a legal dispute over a contract. Company A files a lawsuit claiming breach of contract, and Company B defends itself, while also counterclaiming for damages related to the same contract.
- If Company A wins the case and is awarded damages, but Company B successfully defends a portion of the claims, the court may rule that Company A is "wholly successful" for the damages awarded but "partly successful" in defending the contract issues.
- In this case, Company B may be entitled to indemnification for expenses associated with defending against the claims that were successfully resolved in its favor, either fully or in part, depending on the degree of success.
In another example, a party might be entitled to indemnification for expenses even if they win only part of the case. For instance, if a plaintiff sues for both contract breach and negligence but only succeeds on the negligence claim, they may still be entitled to reimbursement for the expenses incurred defending the negligence claim, proportionate to the success.
An example of indemnification for expenses of a party who is wholly or partly successful clause
Here’s how an indemnification for expenses of a party who is wholly or partly successful clause might appear in an agreement:
“In the event that a Party is involved in a legal action and is wholly or partly successful in its claims, the other Party agrees to indemnify and reimburse the successful Party for all reasonable legal expenses, including attorney's fees, incurred during the proceedings. If the successful Party is only partially successful, the indemnification shall be proportional to the degree of success achieved.”
Conclusion
Indemnification for expenses of a party who is wholly or partly successful ensures that the party who prevails in a dispute is not unduly burdened by legal costs, particularly when only part of the case is won. This provision encourages fair treatment by ensuring that the costs of litigation are shared equitably between the parties, regardless of the level of success achieved. It is a common clause in many contracts and agreements where legal disputes are expected, offering financial protection and encouraging the enforcement of rights.
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.