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Indemnification clause
An indemnification clause requires one party to cover specified losses or claims suffered by the other. The wording decides which events qualify, whether the clause covers direct claims between the parties, who controls a third-party defense, and whether a liability cap applies. A duty to defend can start when someone files a covered claim, before a court decides who owes damages. State law varies, so the clause should state the scope and procedure in plain terms.
Reviewed by
Brent Farese
Ex-General Counsel & CEO
July 23, 2026
Sample force majeure clause for commercial contracts
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.
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Findings from public force majeure clause studies
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.
~48%of commercial contracts even contain a standalone force majeure clauseRutgers, n=621
18%of clauses named a pandemic, epidemic, or disease triggereBrevia / QuisLex, n=171
~12%granted a termination right (about 40% in supply chain / logistics)eBrevia / QuisLex, n=171
90 daysmedian duration before a termination right triggeredeBrevia / QuisLex, n=171
Force majeure terms without published percentages
- Payment carve-out: model clauses (BIMCO 2022, ICC 2020) build in a continuing-payment carve-out, pointing to a common market convention.
- Mitigation obligation: described as common in higher-specificity clauses, without a count.
- Economic hardship: courts do not treat it alone as force majeure unless the clause says so (EAPIL; Vici Racing, 3d Cir. 2014).
Sources- eBrevia / BakerHostetler / QuisLex AI contract study, n=171 (via DFIN).
- Rutgers Business Review, Force Majeure Clauses and the COVID-19 Pandemic, n=621 SEC-filed JV contracts.
- Shook, Hardy & Bacon, Force Majeure and Common Law Defenses: A National Survey.
- EAPIL, The COVID-19 Pandemic and Commercial Contracts. BIMCO 2022 / ICC 2020 model clauses.
Force majeure clause mistakes that create enforcement risk
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.
How to negotiate a force majeure clause
| 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 |
Questions about force majeure clauses
What is an indemnification clause?
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.
indemnification
What is the difference between indemnify, defend, and hold harmless?
"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.
indemnification
Should an indemnification clause be mutual?
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.
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Does an indemnification clause cover claims between the parties?
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.
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Is a duty to defend the same as a duty to indemnify?
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.
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Who should control the defense of an indemnified claim?
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.
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What happens if a party gives late notice of an indemnity claim?
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.
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Does a limitation of liability cap apply to indemnification?
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.
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Do indemnification obligations survive termination?
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.
indemnification
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Related contract clause guides
More from Aline on drafting, negotiating, and managing commercial contracts.
- 78% of 40 surveyed supply agreements contained a provision requiring the supplier to indemnify the buyer. Source: Practical Law, Managing Risk in Commercial Supply Agreements, n=40.
- Two-thirds of the 31 agreements with indemnification covered breaches of representations and warranties. Source: Practical Law supply-agreement survey, n=31 indemnification subset.
- Just over half of the 31-agreement subset covered non-fulfillment of covenants. Source: Practical Law supply-agreement survey, n=31 indemnification subset.
- Just over half of the 31-agreement subset covered supplier gross negligence, simple negligence in some agreements, or willful misconduct. Source: Practical Law supply-agreement survey, n=31 indemnification subset.
Other public findings and M&A comparison
- Mutual or one-way indemnity: no representative percentage exists for general commercial contracts. Match each trigger to the risk each party controls.
- Liability limits in the supply sample: 75% of the 40 agreements excluded at least one type of damages. Just over one quarter included a monetary cap. These figures describe the contract's limitation-of-liability terms, not whether indemnification itself was capped.
- Direct claims: commercial drafting guidance says indemnities traditionally cover third-party claims, but broad language may reach claims between the parties. State the intended scope.
- Duty to defend: indemnification and defense are separate obligations. Use express defense language and define when the duty starts.
- Notice: require prompt notice, but tie any loss of rights to material prejudice caused by delay.
- M&A comparison: the 2021 ABA study found that 56% let the indemnifying party control a third-party defense. Of the control subset, 84% included exceptions. In the relevant settlement subset, 96% limited settlement authority.
- Survival: no survey-based general commercial percentage was located. The ABA M&A survival subset used an 18-month period in 37% of deals.
Sources
- Practical Law, Managing Risk in Commercial Supply Agreements, survey of 40 publicly filed supply agreements.
- American Bar Association, 2021 Private Target Mergers & Acquisitions Deal Points Study, n=123 overall.
- Mark Cohen, Indemnification Provisions in Commercial Contracts: A Drafting Primer, Colorado Lawyer, January 2020.
- Jennifer G. Cooper and Savannah McCabe, Indemnification Clauses in Commercial Contracts (TN), Practical Law and Baker Donelson.
Method note: The Practical Law survey reports 40 publicly filed supply agreements with a Canadian-company nexus. It is a small, dated sample concentrated in a few industries. The ABA study covers a separate population of private-target acquisition agreements, and several ABA percentages use narrower subsets. No source located supports a representative percentage for mutual indemnity, IP indemnity, duty to defend, notice, or survival across general commercial contracts.
Qualitative drafting guidance, separate from the cited survey data. Attorney sign-off required.
| Issue | Market posture | Reasonable fallback | Push back hard |
|---|
| Claim scope | Say whether the indemnity covers third-party claims, direct claims, or both | Limit direct claims to named breaches, such as confidentiality | "Any and all claims arising from the agreement" with no scope boundary |
| Covered events | Tie each trigger to a risk the indemnifying party controls | Use breach, negligence, and willful misconduct with a clear causation standard | Losses "related to" the agreement regardless of fault or control |
| Duty to defend | State whether the party must defend, reimburse costs, or advance them | Let the indemnified party retain counsel for conflicts, non-monetary relief, or excess exposure | A defense duty with no trigger, counsel standard, or conflict rule |
| Defense and settlement control | Give the indemnifying party control subject to cooperation, conflict, and settlement protections | Require consent that cannot be unreasonably withheld for monetary settlements with a full release | A settlement that admits fault, imposes non-monetary duties, or fails to release the indemnified party |
| Notice | Prompt written notice; late notice reduces rights only to the extent of material prejudice | A fixed notice period with a prejudice exception | Automatic forfeiture for late notice when the delay caused no harm |
| Liability cap | State whether the general cap applies and identify any separate cap or carve-out | Use a higher cap for named risks backed by insurance | Silence that leaves the indemnity and limitation of liability clauses in conflict |
| Survival | Tie survival to the claim type, legal limitation period, and available insurance | A fixed claim period with protection for timely noticed claims | Indefinite survival for every trigger with no insurance or record-retention match |
