How and When to Write a Letter of Indemnity.

Indemnity clauses are tricky yet very useful contractual provisions that allow the parties to manage the risks attached to a contract, by making one party pay for the loss suffered by the other. The scope and effect of an indemnity depends mostly on the intention of the parties and the way it is drafted, so make sure you pay great attention to it when you enter into a contract.

A letter of indemnity is a letter used in the world of business to protect a party against financial losses in the event that an obligation is not upheld. For example in international shipping a carrier may take on the financial loss associated with the cargo becoming damaged before it reaches the importer, as a condition of doing business with the exporter.

An Indemnity Agreement enables to transfer risk from one party to another easily. Business people enter into indemnity agreement samples with other parties to protect themselves against employee lawsuits or claims for damages to goods or vehicles. They define various terms and conditions which help in safeguarding one’s business from unexpected lawsuits.

Protect yourself or your client by using this sample indemnity agreement template (hold harmless agreement) as a base to establish financial responsibility. Get started with a clean and professional ready-made template that sure simplify your work.

The indemnity clause is usually the most contested clause in any contract negotiation including in property transactions. This is understandable. After all, the ultimate effect of an indemnity clause is either to reaffirm or to alter the common law or statutory position in relation to the recovery of damages.

If the indemnification clause is being used in a warranty, you should make sure that indemnity is limited by limiting the warranty. Let's assume that you are a software developer and you need to guarantee that your program is not infringing on the IP rights of a third-party.

Outline of steps to follow when drafting an indemnity clause By way of a general guide, when drafting an indemnity clause in a contract the drafter should: First, consider the source of any potential loss or damage which may arise in connection with the contract.

The classic Type I indemnity clause involves the indemnitee receiving defense, indemnity and a hold harmless agreement from the indemnitor for any claim, loss or other liability which arises from the work or services of the indemnitor, except that the indemnification does not apply with respect to the sole negligence or willful misconduct of the indemnitee.

Drafting Effective Indemnity Clauses 13 Wentworth Selborne Chambers To view this article you need a PDF viewer such as Adobe Reader. If you can't read this PDF, you can view its text here.

An indemnification clause basically transfers risk from one party to another. These provisions require one party to assume responsibility for third party claims made against the other party, and they’re very commonly used in construction contracts. In fact, indemnification clauses are a major player in the ever-waging war over managing risk.

A letter of indemnity is a letter used in the world of business to protect a party against financial losses in the event that an obligation is not upheld.