What is indemnity in construction contracts?
Indemnification is a concept whereby one party contractually agrees or is otherwise legally obligated to bear the financial risks of another party. The construction industry relies on indemnification clauses to manage and transfer risk.
What is an indemnity provision?
As discussed, an indemnity provision transfers risk from one party (called the “indemnitee”) to another party (called the “indemnitor”). Under an indemnity provision, the indemnitor agrees to reimburse the indemnitee for losses resulting from a claim or claims brought by a third-party.
What is the purpose of an indemnity clause in a contract?
Indemnification clauses are clauses in contracts that set out to protect one party from liability if a third-party or third entity is harmed in any way. It’s a clause that contractually obligates one party to compensate another party for losses or damages that have occurred or could occur in the future.
What does it mean to indemnify a contractor?
The indemnity clause is a risk-shifting provision that requires the contractor to defend, reimburse, and “hold harmless” the owner and architect from claims and liability “arising out of” the contractor’s work. Indemnity clauses share the same core purpose, but can have varying reach, depending on the language used.
What does indemnity mean in a contract?
Indemnity is a contractual agreement between two parties. In this arrangement, one party agrees to pay for potential losses or damages caused by another party.
What is the effect of an indemnity?
The object and effect of a contractual indemnity are to alter the common law or statutory rights of parties. It does not matter whether you act for the party giving or receiving the indemnity — it is essential that you consider the extent to which a contracting party seeks to alter those existing rights.
Does your contract need an indemnity clause?
Indemnity clauses are sometimes reasonable for the contract’s terms or even essential for parties to carry out an agreement. Other types of indemnity clauses are completely unnecessary and could expose a party to liabilities they have no control over.
What does that indemnification clause mean in your contract?
Indemnification in a Contract. An indemnification clause is generally included in most contracts to provide financial compensation for one party as a result of the potential act or omission of another party in the contract.
What does indemnity mean in a performer contract?
An indemnity is a promise by one party to compensate the other party for loss or damage suffered by the other party during the performance of the contract. An indemnity is also known as a ‘hold harmless’ clause as one party agrees to hold the other party harmless.
What is an indemnity clause in a construction contract?
In a construction contract, an indemnity clause is an agreement between the parties regarding responsibility for losses or damages in connection with the construction project. Basically, an indemnity clause provides one of the parties with security against damages and sometimes exempts them…