Full Details

Indemnity Clauses
Indemnities are often described as "standard" provisions as though that automatically makes them reasonable. So what is an indemnity?

An indemnity is a promise by one party (party A) to reimburse another party (party B). Sounds pretty innocuous so far, doesn't it? The crucial questions are:

Under what circumstances is the party reimbursed?

The terms of indemnity will provide when Party B should be reimbursed. There doesn’t need to be any requirements for fault on the part of Party A. Party A may become liable for the acts of omissions of someone who is not under his control e.g. a customer in his shop or workman attending his premises.

What is reimbursed?

The terms of the indemnity will set out what Party A is actually reimbursing. Often an indemnity uses the word:
“All expenses, costs, claims, damage and loss”

In other words, all expenses – whether they are reasonable or not, all claims – with no obligation on Party B to defend such claims if it would be reasonable to do so, and all losses – whether or not they are foreseeable.

Rules have been established which set out when one person should pay damages to another where the former’s acts on omissions cause the latter to suffer loss. In most cases, there has to be some element of fault and the injured party can only recover certain losses depending on the type of loss and how foreseeable the losses were.

What’s the purpose of an indemnity?

What an indemnity seeks to do is remove all the limitations imposed by decided caselaw. On the basis that decided caselaw is the result of careful deliberation over many years, it would seem reasonable to suppose those limitations have been imposed for good reason.

You should always beware of signing a legal document that requires you to “indemnify” someone else especially where the other party doesn’t agree to indemnify you in return.
Leases, for example, almost never include an indemnity by a landlord but almost always include an indemnity by a tenant. Any suggestion that either the tenant’s indemnity should be removed or that the landlord should reciprocate is normally met with incredulity by the landlord’s solicitor. Why? If it is such a reasonable provision then why is it unthinkable that a landlord should provide an indemnity?

The answer, of course, is that indemnities are unfair.

If you are being asked to sign a lease or other legal document which includes indemnity clauses take legal advice.

Go back

Contact Us







Do you want us to phone you?:

Yes No

Comment or question*:

*Denotes a required field: