An indemnification clause requires one party to cover specified losses, claims, liabilities, or expenses for another party.
It is a risk-allocation term used to decide who bears certain costs if a defined problem occurs.
Why an indemnification clause matters
Indemnification can shift major financial risk between contracting parties. It may cover third-party claims, defense costs, regulatory losses, intellectual property claims, personal injury, data incidents, or breach-related losses.
The exact wording matters because the clause may be broad, narrow, capped, mutual, one-sided, or limited by law.
Where an indemnification clause appears
Indemnification clauses appear in service agreements, vendor contracts, leases, construction contracts, software agreements, acquisition documents, licensing agreements, and settlement agreements.
They are often read together with insurance, notice, defense-control, and limitation-of-liability provisions.
How it differs from nearby terms
Indemnification addresses who must cover specified losses or claims. A limitation of liability clause limits how much or what type of damages may be recovered.
A liquidated damages clause sets an agreed amount for a defined breach, while indemnification may apply to third-party claims and defense costs.
Practical example
A software vendor agrees to indemnify a customer if a third party claims the licensed software infringes intellectual property rights. The clause defines notice duties and who controls the defense.
Related Terms
- Contract
- Breach of Contract
- Limitation of Liability Clause
- Liquidated Damages Clause
- Damages
- Legal Remedy
Quick check
Question: Is indemnification mainly about shifting specified losses or claims?
Answer: Yes. It assigns responsibility for covered losses, claims, liabilities, or expenses.