Business Indemnification Attorneys

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What Is a Contract Clause?

A contract clause is a certain section or provision in a written contract. The clause addresses a specific detail related to the total agreement. The goal of the contract clause is to clearly define rights, privileges, and duties of each party to the contract. One common type of contract clause is called a business indemnification clause.

What Is an Indemnification Clause?

An indemnification clause is a contractual agreement between parties in which one party will assume liability for the other party for specific future legal claims. To indemnify means to insure one party against loss or to reimburse after a loss. Indemnification clauses are often used in insurance forms.

What Is a Business Indemnification Clause?

A business indemnification clause is a contractual agreement between a business and another party to protect the other party from future financial loss or legal claims related to the contract in which the agreement appears. It often is part of a contract between a business and an individual, instead of part of a contract between two businesses.

When Is a Business Indemnification Clause Used?

This type of indemnification clause is most often used to protect executives such as officers and directors from lawsuits brought by shareholders. Such a clause is a business’s promise that it will assume any liability for the executive’s actions that were done for the benefit of the business in the event that the executive is sued for those actions by shareholders of the business. The clause appears in the employment contracts between the executives and the business.

Is a Release Clause the Same as a Business Indemnification Clause?

No. A release clause is an agreement between parties in which both parties give up their right to file a lawsuit against the other party over a breach of the contract. The release clause may indicate whether there are other options available to the parties to resolve any disputes that may arise, such as mediation or negotiation.

Is Having a Business Indemnification Clause a Good Idea?

It depends on the circumstances that give rise to the contract and what a lawyer advises. In general, the clause can be a huge financial liability for a party who does not have the resources to protect the other party from lawsuits.

Can I Avoid Having a Business Indemnification Clause in My Contract?

Any party to a contract can refuse to sign a contract if it contains a clause that the party does not want. If a party refuses to sign a contract containing a business indemnification clause, the other party may be willing to rewrite the contract so that it does not contain such a clause. It is also advisable to avoid using boilerplate contracts in such an instance. This type of contract is simply a template contract that often includes business indemnification clauses.

Do I Need to Speak to an Attorney about a Business Indemnification Clause?

Business indemnification clauses can be complex and difficult to understand. Before agreeing to or signing a contract with a business indemnification clause, contact a business lawyer. The lawyer will explain your rights with regard to the clause and the contract as a whole.

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Last Modified: 12-29-2015 10:37 PM PST

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