Demystifying Contracts: What’s An Indemnification Clause?

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Entering into a contract sometimes creates risk. One way to limit that risk is to have a well-drafted indemnification or hold harmless provision. The words indemnification and hold harmless essentially mean the same thing, so you may see them both ways in contracts.

This language shifts responsibility for damages from one of the contracting parties to another. Say, for example, there’s a construction project, and the general contractor requires its subcontractor to provide indemnification for any loss arising out of the work. This incredibly wide hold harmless net may very well result in the subcontractor’s having to step up to the plate if a worker employed by almost anyone on the project is injured and then sues the GC. The GC uses this language to shift responsibility to its subcontractor.

As you can see, it’s better to get hold harmless language to favor you. If your bargaining power isn’t strong enough, though, one way to limit exposure is by agreeing to cover only damages that you cause instead of being more broadly responsible for any damages relating to the contract or arising out of the work.

An effective way to limit risk is to have your attorney include a hold harmless provision in your favor that creates protection for circumstances that may crop up down the road.

Lisa Coppola

Written by Lisa Coppola

Founder of The Coppola Firm

Lisa A. Coppola, Esq. understands the challenges her clients face, whether they’re starting a new business, taking their existing operations in a new direction, or facing a claim or threat.

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