indemnity
Definition
Indemnity is a promise by one party to cover the losses, damages, or legal costs that another party might face because of a specific situation or relationship. Think of it as one person agreeing to hold another person financially harmless if something goes wrong. Businesses encounter this constantly in contracts, where one side agrees to pay for any mess the other side gets pulled into.
Example
If you hire a contractor to renovate your store and they accidentally damage a customer's car, an indemnity clause in your contract could require the contractor to pay for that damage instead of leaving you on the hook.
Watch Out
Indemnity clauses can be written very broadly, so you could unknowingly agree to cover costs for situations you never imagined, which is why you should always read these clauses carefully before signing any contract.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.