Monday, February 16, 2009

What Did You Agree To? Indemnity

In the third part of this What Did You Agree To? series, we are going to look at indemnity.

What in the hell is indemnity, and why is it in most contracts?

I have made it clear from the start of this blog, that I will do my best to refrain from using words or terms that are confusing or don't make sense. However there are times when we need to use these term, especially when they are common and prevalent.

Indemnity is a commitment that any future losses will be covered. Now in plain language.

If you indemnify someone, then you agree to cover their losses if there is a breach. A common for of indemnity is when you publish an article on the Internet. The website you publish on will have an indemnity provision that basically says if they get sued for having copyright content, you agree to cover their costs.

These terms or provisions can be nasty little surprises later on. Here is an example.

Kyra hires Joshua Tree Construction to build a deck for her. As part of the agreement, there is an indemnity clause. The clause basically says that Joshua Tree wont be responsible for incidental damage to the neighbors land through the building of the deck.

So if some Mensa member from Joshua Tree shreds the neighbors prize roses, Kyra could find herself on the hook. Or at the very least in the middle of a huge battle.

Another example is in credit agreements. You usually agree to indemnify or cover all collection costs of the company that is trying to collect.

Many locations have laws that restrict what can be included in an indemnity clause. Just like the "General Disclaimer" talked about in my article COAT CHECK, a provision that is "agreed" too does not make it legal or enforceable.

When you are reading contracts make sure you look at the indemnity clause. Try to understand what they are asking or insisting on. Knowing ahead of time helps prevent surprises.

If you find that you are being called on because of an indemnity clause, you need to speak to a lawyer right away. If you need to speak to a lawyer, click HERE. Lawyers are online, and can answer your question within minutes for as little as $15.

So remember to read the indemnity clauses. Just because there is one, does not mean it is legal, and if you find yourself in a battle over one, then speak to a lawyer as soon as possible.

Copyright © 2009 Peter MacSweeney.
All rights reserved. Reproduction in whole or in part without the express written consent of the author is forbidden. Contact the author through the comment form for all inquiries, including media.

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