Today’s Contracts Enforceability Issues, Part III: Decoding Indemnity Clauses

Some of the most boilerplate-looking provisions in contracts are often the most onerous. Indemnity clauses certainly qualify. For example, an indemnifying party (such as a contractor) could find itself owing the indemnified party (such as an owner and its architect) substantial reimbursements and defense costs (including even provision of an attorney) for the defense of third-party claims (such as the claim of a supplier). This could happen where the indemnifying party (the contractor) was only alleged to have been partially at fault — and even where the contractor may not have been at fault at all. It is important for indemnitors (those giving indemnity rights) and indemnitees (those receiving indemnity rights) to understand the risks involved with these clauses. A useful way to understand indemnity clauses is to break them down into their constituent parts. Who Benefits and Who Is Burdened?First, at a basic level, consider the indemnitors and indemnitees. In some contracts, the litany of individuals and entities included as indemnitors and indemnitees takes up several lines. As painful to read as some of those lists may be, they essentially consist of the following family tree: one of the parties to the contract and a) all of its related individuals and entities… Read full this story

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