What indemnification clauses cover, what to negotiate, and what yours might be missing. Compare claim scope, defense duties, settlement rights, liability caps, and sample language drawn from published commercial-contract research.
Paste your force majeure clause. You get a score and a flag on each thing worth fixing. We analyze it, we do not store it.
The most directly relevant public dataset reviewed 40 publicly filed supply agreements with at least one Canadian party. The agreements were entered into during the roughly ten years before the survey's 2015 publication. The sample is small, dated, and concentrated in pharmaceuticals, biomedical products, commodities, metals, and wood. It provides a supply-agreement reference point, not a market-wide rate for SaaS, IT, services, licensing, or other commercial contracts.
Aline drafts and redlines against your own approved clause library, so every contract starts from language you already trust. Draft, redline, and query agreements 10x faster with AI.
| Issue | Market posture | Reasonable fallback | Push back hard |
|---|---|---|---|
| Payment carve-out | Payment obligations excluded from force majeure | Short grace period for banking-system failure only | Any clause that lets the counterparty stop paying during an event |
| Event list | Enumerated list plus "including, without limitation" | Enumerated plus a catch-all tied to reasonable control | A closed "limited to" list, which leaves you litigating the gap |
| Epidemic | Expressly named after 2020 (most clauses still do not) | "Public health emergency declared by a competent authority" | Silence; courts split on whether "act of God" reaches COVID |
| Notice | Prompt written notice with a workable window | Prompt notice, no fixed day count | Notice as a condition precedent on a 48-hour fuse |
| Termination trigger | Either-party right after a prolonged event (public median 90 days) | A longer trigger, either party | Indefinite suspension with no termination right |
| Economic hardship | Expressly excluded | Silence | "Material adverse change in market conditions," a repricing right in disguise |
The clause never says whether it covers direct claims. A party later tries to use the indemnity for an ordinary breach claim between the signatories. Courts may read broad phrases such as "any claims" differently across jurisdictions. State the intended scope.
The clause combines "indemnify, defend, and hold harmless" without a defense procedure. The parties then disagree about when the defense starts, who chooses counsel, and who may settle. Define the trigger and control rights in the same section.
The indemnity and liability cap point in different directions. One section caps all liability, while the other promises to cover every loss. Say which rule controls and name each carve-out or separate cap.
The notice clause turns a late email into complete forfeiture. Use a material-prejudice rule so the remedy tracks the harm caused by the delay.
The settlement clause lets the defending party bind the indemnified party to an admission, injunction, or payment. Require a full release and consent for non-monetary relief or any uncovered amount.
A balanced, mutual starting point that reflects the market postures above.
Each party (the "Indemnifying Party") shall indemnify, defend, and hold harmless the other party and its officers, directors, employees, and agents (each, an "Indemnified Party") from and against any third-party claim, action, or proceeding, and any resulting damages, judgments, settlements, costs, and reasonable outside attorneys' fees, to the extent arising from (a) the Indemnifying Party's gross negligence or willful misconduct, (b) bodily injury, death, or damage to tangible property caused by the Indemnifying Party, or (c) the Indemnifying Party's breach of its confidentiality obligations. Provider shall also indemnify, defend, and hold harmless Customer from any third-party claim that the services, as provided by Provider and used as permitted under this Agreement, infringe a United States patent, copyright, or trademark.
The Indemnified Party shall give prompt written notice of a covered claim. A delay reduces the Indemnifying Party's obligations only to the extent the delay materially prejudices the defense. The Indemnifying Party may control the defense with counsel reasonably acceptable to the Indemnified Party. The Indemnified Party may participate with counsel at its own expense. The Indemnifying Party may not settle a claim without the Indemnified Party's written consent if the settlement admits fault by the Indemnified Party, imposes non-monetary relief, requires an uncovered payment, or fails to release the Indemnified Party from the claim. The Indemnified Party shall provide reasonable cooperation at the Indemnifying Party's expense.
Except for any carve-out or separate cap stated in the limitation of liability section, the parties' indemnification obligations remain subject to that section. A claim noticed before the end of the applicable survival period survives until the parties resolve it.
An indemnification clause requires one party to cover specified losses, costs, or claims suffered by another party. The clause should identify the covered events, recoverable losses, claim procedure, defense duty, settlement rights, and any cap or survival period.
"Indemnify" addresses covered losses. "Defend" can require a party to take over or fund the response to a third-party claim before a court decides liability. Courts interpret "hold harmless" by state law, so the contract should describe the intended obligation instead of relying on the phrase alone.
Mutual wording works when both parties control comparable risks. Many commercial agreements need different triggers on each side. A provider may cover IP infringement, while each party covers its own misconduct and confidentiality breach. Compare the risks, not the number of sentences given to each party.
The answer depends on the wording and governing law. Indemnities traditionally address third-party claims, but broad language may also reach direct claims between the signatories. State the intended scope and handle ordinary breach damages in the liability section when that structure fits the deal.
No. A defense duty may start when a third party alleges a covered claim. The indemnity duty usually turns on the loss the covered conduct caused. The contract should say who chooses counsel, pays defense costs, controls strategy, and approves settlement.
The party paying for the claim often asks to control the defense. The other party should retain protection for conflicts of interest, claims that exceed the cap, criminal allegations, and non-monetary relief. Settlement terms should require a full release and protect against admissions or uncovered payments.
The contract controls. A balanced notice clause reduces the indemnifying party's obligations only to the extent the delay materially harmed the defense. A strict condition precedent can forfeit the claim after a missed deadline even when the delay caused no harm.
It may. Read both clauses together and state the result. The contract can place indemnity under the general cap, use a separate higher cap for named claims, or carve out specific risks. Silence invites a dispute over which clause controls.
They can, but the contract should state the period and the claims it covers. Match survival to the risk, applicable limitation period, insurance, and record-retention needs. Preserve a claim that a party noticed before the survival period expired.
More from Aline on drafting, negotiating, and managing commercial contracts.
