Should indemnification be mutual?

In most balanced contracts, yes. If you're indemnifying the client for your mistakes, they should indemnify you for theirs. A one-sided indemnification clause puts all the risk on you. Push for mutual indemnification — each party covers the losses caused by their own actions.

What does 'hold harmless' mean in an indemnification clause?

'Hold harmless' means you agree not to hold the other party responsible for certain losses. It's often paired with indemnification: 'Party A shall indemnify and hold harmless Party B.' The practical difference is subtle — indemnification is about paying for losses, hold harmless is about not blaming someone for them. Many lawyers use them together as a belt-and-suspenders approach.

Can you cap indemnification obligations?

Yes, and you should try to. Uncapped indemnification means your exposure is unlimited. Common approaches include capping indemnification at the total contract value, at the fees paid in the prior 12 months, or at a specific dollar amount. Some obligations (like IP infringement or confidentiality breaches) are often carved out from caps.

What triggers an indemnification obligation?

The contract defines the triggers — typically third-party claims arising from specific events like IP infringement, negligence, breach of confidentiality, or bodily injury. The indemnifying party usually covers defense costs, settlements, and judgments. Many clauses require the indemnified party to provide prompt notice and cooperate in the defense.

Does indemnification cover attorney's fees?

Only if the clause says so. Well-drafted indemnification provisions explicitly include 'reasonable attorney's fees and costs' in the covered losses. Without that language, you might be covered for the judgment but stuck paying your own legal bills to get there. Always check.

Contract Clause Library

Essential

Indemnification Clause

Protects you from third-party claims by requiring the other party to cover losses caused by their actions or negligence.

What it means

Indemnification is one party's promise to cover the other's losses if something specific goes wrong. It's the 'I'll pay for it if this blows up' clause.

How it works in practice

You hire a contractor to build your website, and they accidentally use a copyrighted image. The photographer sues you. An indemnification clause in your contractor agreement means the contractor pays for the lawsuit — not you. Watch the scope: some indemnification clauses are broad ('any and all claims'), and some are narrow ('claims arising from contractor's negligence'). Broad clauses shift more risk. If someone asks you to sign one, make sure you understand what you're covering. Also check whether the obligation is capped — unlimited indemnification exposure can be a serious financial risk for a small service provider.

Example clause language

The Service Provider shall indemnify, defend, and hold harmless the Client, its officers, directors, employees, and agents from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorney's fees) arising out of or related to the Service Provider's breach of this Agreement, negligence, or willful misconduct in the performance of Services.

When you need it

Hiring contractors or agencies who interact with third parties on your behalf
Licensing software or content where IP infringement could occur
Service agreements where the provider's work could cause harm to third parties
Any contract involving access to sensitive data or customer information

When you might skip it

Simple one-time purchases with no ongoing obligations
Low-value transactions where litigation risk is negligible

Found in these contract types

Service Agreement Consulting Agreement Freelance Contract Employment Agreement Partnership Agreement

Related legal terms

Hold Harmless Liability Liquidated Damages Severability Intellectual Property Assignment Termination

Frequently asked questions about indemnification

Limitation of liability caps how much you can owe total. Indemnification is a promise to cover specific losses. They work together: you might have a $100,000 liability cap, but an indemnification obligation for IP infringement that sits outside that cap. Always check whether indemnification obligations are subject to the liability cap or carved out from it.

See full glossary entry for “Indemnification”

Detailed definition, related terms, and more in the Contract Glossary

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This content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.