Purpose

Contractual tool to shift a legal responsibility from one party to another, providing a contractual
remedy to recovering monetary damages in the event of:
Breach of a covenant / undertaking.
Breach of a representation or warranty.
Claims by third parties against the indemnitee (usually lawsuits, requiring defence and
settlement payments).
Breach of other specific terms of the contract.

Perceived as advantageous over normal contractual remedies of damages because of:
- Removal of the need to prove (1) that there was a breach, and (2) damages claimed
have indeed been suffered. [This is actually only where claim under indemnity is
interpreted by a court as a claim for a debt, and not claim for damages for breach of
contract]
-

Giver

1. Duty to mitigate:
Nothing in this clause shall restrict or limit [Party 1]'s general obligation at law to mitigate
a loss it may suffer or incur as a result of an event that may give rise to a claim under this
indemnity.
2. Sole remedy:
This clause sets out A's entire liability to B, and B's sole remedy, in respect of [insert
scope of indemnity]".
3. Exclude indirect or consequential losses.
4. Make it mutual if we impose an obligation on counterparty (for e.g. obligation to keep
confidential our interest in the deal)
5. To the extent determined by a court of competent jurisdiction in a final judgment from
which no or a settlement between the Parties
6. Insert Third Party Claims Defence clause:

The Indemnitee shall not, except at his own cost, take any steps to compromise or settle
any claim or admit liability without specific instructions in writing from the Indemnitor nor
give any information or assistance to any person claiming against him, but the Indemnitor
shall for so long as they shall so desire have the absolute conduct and control of all
proceedings (including arbitration) in respect of any claims for which the Indemnitor may
be liable under this [provision / agreement], and may use the name of the Indemnitee to
enforce for the benefit of the Indemnitor any order made for costs or otherwise or to
make or defend any claim for indemnity or damages against any third party or for any
other purpose connected with this Agreement.

Receiver

1. If the agreement contains a no third-parties beneficiaries / / rights of third parties clause,
consider excluding indemnified parties from that clause.
2. If the indemnified party wishes the indemnity to cover specific types of third-party claims,
such as third-party claims based on non-compliance with law, it should:

(a) specifically address that type of claim in the indemnification provision; or
(b) seek a representation and warranty or covenant from the indemnifying party about
that specific claim and then cover that representation and warranty or covenant in the
indemnification provision.