Indemnification Clause

A contractual provision in which one party agrees to cover specified losses or third-party claims that the other party incurs.

Reviewed by GC AI Solutions Team•Updated August 2026

Definition

An indemnification clause is a contractual provision in which one party (the indemnitor) agrees to compensate the other party (the indemnitee) for specified losses, damages, or legal costs, most often those arising from third-party claims, breaches of the contract, or negligence. It typically includes a duty to defend, a defined list of covered claims, and procedures for notice and control of the defense. Indemnification allocates risk between the parties and is one of the most heavily negotiated provisions in commercial, M&A, and technology agreements.

Shifts liability for specified losses or third-party claims from one party to the other
Defines the covered triggers: breach, negligence, IP infringement, or specified third-party claims
Sets whether the duty to defend is included and whether it is separate from the duty to indemnify
Establishes notice, cooperation, and control-of-defense procedures
Interacts with the liability cap; well-drafted indemnities are carved out of it

Standalone IP and data-breach indemnities have become standard in technology and SaaS contracts, reflecting how third-party infringement and privacy claims now drive the largest exposures.

What It Does

An indemnification clause moves the cost of a defined risk from the party that would otherwise bear it to the party that agrees to cover it. For in-house counsel, it answers a concrete question: if a third party sues over something connected to this contract, who pays the lawyers and the judgment? The clause does three things at once. It defines which claims are covered, it sets whether the indemnitor must also defend, and it fixes the procedures and limits that govern how the obligation works in practice.

When You'll See It

An indemnification clause appears in nearly every substantive commercial contract: vendor and supply agreements, SaaS and technology contracts, M&A purchase agreements, licensing deals, professional services engagements, and investment management agreements. In M&A it is the core risk-allocation mechanism, paired with caps, baskets, and escrow. In commercial contracts it sits beside the limitation of liability and warranty provisions. The negotiation turns on scope (which claims), direction (one-way or mutual), and whether the duty to defend is independent. See also: limitation of liability, representations and warranties, and insurance.

Examples

Caterpillar Inc. / Suzette M. Long

Consulting AgreementMutual, with duty to defendMutual2024

"Each party shall indemnify, defend, and hold harmless the other party, along with its affiliates, directors, officers, employees and agents from and against any and all suits, claims, demands, losses, damages, costs and expenses of any nature whatsoever, including without limitation litigation expenses, attorney's fees and liabilities incurred in connection therewith arising out of: (i) injury to, or death of, any person whatsoever or damage to property of any kind..."

Source

Blue Star Foods Corp. / Low Tide, LLC

Vendor AgreementBreach and negligenceOne-Sided2024

"BSFC shall and does hereby indemnify, protect, defend and hold LT harmless from and against all direct damages, including reasonable attorneys' fees incurred, arising against, or suffered by LT resulting from: (i) the breach of any representation or warranty of BSFC set forth in this Agreement; (ii) the failure of BSFC to perform any material obligation required by this Agreement; or (iii) BSFC's negligence or misconduct. This indemnity shall survive the expiration or termination of this Agreement."

Source

Deerfield Campbell LLC / Sight Sciences, Inc.

First Amendment to Multi-Tenant Industrial Triple Net LeaseBroker indemnityOne-Sided2024

"Landlord hereby agrees to and shall indemnify, defend and hold harmless Tenant from and against any and all claims, liabilities, causes of action, damages, including reasonable attorneys' fees and costs, arising out of any claims or causes of action which may be asserted against Tenant by any other broker, finder, or other real estate agent with whom Landlord has purportedly dealt..."

Source

Sandoz Inc. / RareGen, LLC

Third Amendment to Promotion AgreementBreach of repsOne-Sided2022

"Indemnification by Sandoz. Sandoz shall defend, indemnify and hold harmless RareGen and its Affiliates and its and their respective officers, directors, employees, agents, representatives, successors and assigns from and against all Claims, and all associated Losses, to the extent incurred or suffered by any of them to the extent resulting from or arising out of (a) any misrepresentation or breach of any representations, warranties, or covenants ... of Sandoz under this Agreement..."

Source

Fresh Tracks Therapeutics, Inc. / Botanix SB Inc.

Amendment No. 1 to Asset Purchase AgreementThird-party claimsMutual2023

"Indemnification by the Sellers. The Sellers, jointly and severally, shall indemnify, defend and hold harmless Buyer, Guarantor, their respective Affiliates and officers, directors, agents and employees from and against any Third Party Claims and Losses arising therefrom to the extent resulting from any breach of representation, warranty or covenant of either or both of the Sellers set forth in this Amendment."

Source

Negotiate

If you're the indemnitee

You want broad protection

Cover third-party claims arising from the other party's breach, negligence, and IP infringement, at a minimum.
Require a duty to defend that is separate from the duty to indemnify, so the indemnitor funds the defense as it goes.
Carve indemnification out of the liability cap, or give it a higher dedicated cap.
Keep your notice obligation reasonable; a short delay should not forfeit the indemnity unless it actually prejudiced the defense.
Add an IP-infringement indemnity with a remedy obligation: procure a license, modify, or refund.

If you're the indemnitor

You want to limit exposure

Limit covered claims to third-party claims, and exclude first-party losses between the parties.
Condition the obligation on prompt written notice and your control of the defense.
Cap the indemnity, or fold it under the general liability cap.
Exclude claims arising from the indemnitee's own negligence or unauthorized modifications.
Tie the obligation to a closed list of triggers rather than open-ended "any and all claims."

Indemnities are won and lost on scope and defense. The word "indemnify" is the easy part; read which claims are covered and who controls the lawyers before anything else.

Red Flags

An indemnity that reaches first-party losses, turning a third-party-claims clause into a general guarantee.
A duty to indemnify with no duty to defend, leaving you to fund the defense and recover later, if ever.
An indemnity capped under the same low liability ceiling as everything else.
“Any and all claims” with no carve-out for the indemnitee's own negligence or misuse.
Notice provisions that forfeit the entire indemnity for a brief delay, regardless of prejudice.

Indemnification Clause FAQs

What is an indemnification clause?

An indemnification clause is a contractual provision in which one party agrees to compensate the other for specified losses or third-party claims, often including the cost of defending those claims.

What is the difference between indemnification and a hold harmless clause?

They usually travel together. To indemnify is to reimburse a loss; to hold harmless is to agree not to hold the other party responsible for it. Most clauses combine both, and courts in many states treat the two as substantially overlapping.

What is the difference between one-way and mutual indemnification?

In one-way indemnification, a single party indemnifies the other. In mutual indemnification, each party indemnifies the other for claims arising from its own acts. Mutual indemnities are common where both sides create risk.

Does an indemnification clause include the duty to defend?

Not automatically. The duty to defend is separate from the duty to indemnify and has to be stated. A duty to defend funds the defense as it proceeds, while a bare indemnity may only reimburse after the fact.

Are indemnification clauses enforceable?

Generally yes. Many states limit or bar indemnification for a party's own gross negligence, recklessness, or intentional misconduct, and some restrict broad-form indemnity for one's own negligence.

Is indemnification capped by the limitation of liability clause?

It depends on the drafting. Well-drafted indemnities are carved out of the general cap or given a separate, higher cap, because the third-party exposure they cover can dwarf the contract fees.

Related Clauses

This content is for informational purposes only and does not constitute legal advice.