Question 1

What's the difference between indemnification and limitation of liability?

Accepted Answer

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.

Question 2

Should indemnification be mutual?

Accepted Answer

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.

Question 3

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

Accepted Answer

'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.

Question 4

Can you cap indemnification obligations?

Accepted Answer

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.

Question 5

What triggers an indemnification obligation?

Accepted Answer

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.

Question 6

Does indemnification cover attorney's fees?

Accepted Answer

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.

Indemnification

Definition

In Practice

Common in these contract types

Related terms

Frequently asked questions about indemnification

Create a contract with proper indemnification clauses