Defining What is an Indemnity Agreement?
Indemnity agreements, often referred to as indemnity contracts, are legal provisions found within insurance policies or as stand-alone standalone contracts between parties. At a basic level, an indemnification deal is an agreement aimed at transferring risk and financial responsibility from one party to another. An indemnity agreement is drafted in the early stages of a legal claim and signed at a later stage, following the resolution of the matter in question. An indemnity agreement may be requested as soon as the claim is submitted, but an appropriate agreement will usually not be entered into until after the dispute has been resolved.
Under an indemnity agreement, one party agrees to compensate another by compensating that party for any financial loss it incurs that is associated with a specific act or, more commonly, a specified event. Coverage is typically limited to a specific event or specific events that the parties can reasonably anticipate could lead to the possibility of the loss of money or damage to a particular liability.
For instance, in a typical construction project, a contractor’s contract with the owner may call for the current or future indemnification of the owner by the contractor for acts of negligence committed by the contractor in connection with the project. This type of indemnification agreement puts the contractor in a position of having to plan financially for acts of negligence during a project to ensure it has sufficient funds to cover indemnity agreements it has entered into .
A general contractor may enter into an agreement with another sub-contractor that indemnifies the general contractor for damages caused by the sub-contractor’s failure to properly perform its job on the project. This arrangement places the responsibility of damages on a specific level of subcontractor for negligent performance of its job while allowing sub-contractor to perform its job without worrying about being sued for every issue that may arise in the course of completing its work.
Indemnities can be selective or non-selective. Selective indemnities provide limited coverage to the indemnified. This is often seen in construction contracts of general contractors who seek to indemnify owners of properties for specific acts of negligence committed by the contractor, and may exclude compensation for civil responsibility arising from defective performance. Non-selective indemnities provide wide-ranging coverage to the indemnified. Limiting the scope of liability or extending it to third-parties, such as employees or independent contractors, is not allowed under an indemnification agreement.
The underlying rationale behind indemnity agreements is that the obligation to indemnify another depends on the terms of the agreement. A commonly used phrase by courts in indemnity cases is that an indemnitor’s liability is derivative of the indemnified person’s liability. In other words, an indemnitor does not assume responsibility for the actions of its indemnified unless it expressly agrees to do so in the indemnity agreement.
Key Requirements Found in an Indemnity Agreement
An indemnity agreement is a legal arrangement that protects one party from losses or damages caused by another party. To this end, indemnity agreements typically spell out the following terms:
The parties involved in the indemnity agreement, including their relationships and obligations.
Scope of indemnity, meaning any exceptions or limitations to the indemnity.
Any compensation which may be charged to the indemnifying party for receiving the benefits of the agreement and
Any limitations on the liability of the indemnifying parties.
Why One May Select Indemnity Agreement Samples
Utilizing sample indemnity agreements can be indispensable for anyone tasked with drafting legal documents. Having a base to refer to can help alleviate much of the pressure and answer many questions that pop up during the creation process. Familiarizing yourself with the ins and outs of indemnity agreements is invaluable in crafting a document that will suit your situation. Having a solid understanding of these agreements allows the drafter to ensure that the document will be accurate, understandable, and serve the intended purpose.
The most immediate benefit of utilizing sample indemnity agreements is obviously to save time. Accessing an existing template or agreement can considerably minimize the amount of time you need to spend on drafting your indemnity agreement from scratch. In turn, this can help you avoid a situation where you haphazardly throw together an agreement without knowing the necessary components or specifics of indemnity agreements. A hasty or sloppy agreement can lead to confusion and frustration later on down the line when you find out that you’ve inadvertently omitted crucial information from your draft.
Another significant advantage of using indemnity agreement samples is the reduction of risk involved. Drafting legal documents can be a daunting experience, especially for those with little experience drafting these types of documents. If something goes wrong and you are unsure of how to proceed, it can put your financial and legal future at risk. A pre-existing indemnity agreement can help you see the warning signs that there could be a problem in your draft and enable you to rectify it before it’s too late.
Identifying Sources of Indemnity Agreement Sample PDFs
The internet is rife with resources for indemnity agreements, and free sample PDFs for download. However, one has to exercise caution here; not all of them are reliable. Although LegalZoom offers an indemnity agreement template, it is very much a legal service and there are a few steps to take before the document can be delivered to you. Generally, businesses want indemnity agreements to be the simplest possible, but there is nothing that prevents you from consulting a lawyer to have a custom indemnity agreement drafted for your business, or having an attorney review a document you found online to make sure it follows the laws in your state.
One popular website is eForms, which offers a whole slew of forms and agreements, including indemnity agreements, for free. The online resource ensures that its documents are tailored to the state your business or the person utilizing the indemnity agreement is operating out of, one of the major pitfalls when downloading forms off the internet that are not drafted by a professional. And it turns out that they have a form for almost any purpose you might need a legal document for, whether it’s real estate, business, tax or landlord/tenant. Another website to consider is WikiHow, which reminds downloaders of the need to know their state laws as well. The article does a reasonable job of guiding you through drafting your own indemnity agreement in addition to providing a downloadable sample.
A great resource to check out is the PDF Library. They have a trove of downloadable documents and relevant articles on all kinds of legal topics. Also, although the library has a wide variety of documents, in many cases it is simply not observably marked which documents are free to download and which will cost you money. You will have to go to each document individually to find out. Documents that can be downloaded for free will often state that it is free (for example, "Free Download"). As for the others, some will state the price as you click on them as well as providing screenshots of the document so you can take a look at them before purchasing. If you’re not sure if the document you are looking at is free, you can type the name of the document along with "PDF Library" into Google and find out from the results.
Another website that has quite a few free downloadable legal documents, including indemnity agreements, is RocketLawyer. Like eForms and WikiHow, it will direct you to a questionnaire that will help you complete the document. It also provides relevant articles on the documentation you are trying to fill out, which may act as a refresher to what you think you know, or as a supplement to what you already know.
Modifying Indemnity Agreements from Samples
One would rarely find an agreement that perfectly meets the specifications of a certain case. Customizing an indemnity agreement sample PDF provides a better chance of having an agreement with language that would provide protection. Such an agreement has to be drafted bearing in mind the laws that govern the subject matter as well as the specific terms of the process or transaction. The following considerations should be made to safely customize an indemnity agreement from a sample.
What is the purpose of the indemnity agreement? It is wise to group a couple of agreements that would have similar purpose into one agreement and include a schedule detailing the parts. This allows you to avoid custom tailoring an indemnity agreement for each of them.
It does not mean that it is preferable to refer to relevant sections of a different agreement that has the same purpose. But, it can save you the stress associated with ensuring compliance with all requirements. In addition, this reduces the risk of an inconsistency arising from the custom tailoring of several agreements.
Though indemnity agreements are generally formed without consideration , the importance of seeing what is prevalent regarding this cannot be ignored. States which require notice to claim for indemnity claims will have this. If something tilts the balance of the indemnity agreement in favor of the indemnified, it may be important to ask the indemnified (also called indemnitee) to furnish consideration for it.
Consideration should not be paid by the indemnified when the indemnified only receives the indemnity for the indemnifying party’s breach of warranty even when consideration is provided for the agreement. This is unless the indemnified does not inform the indemnifying party about the breach when he or she should have. Severally issues can arise if pre-printed indemnity agreement samples are used without customization to address the aforementioned consideration in some states.
The third-party requirement in indemnity agreements differ from state to state, making this aspect of an indemnity agreement common grounds for going beyond alterations to pre-printed samples. This entails deciding if indemnity can be offered only to third parties of a certain class or those identified in a list. If identification is appropriate, there should be indication of how the list can be updated.
Avoiding Pitfalls when Using Samples
The first mistake to avoid is to ignore the advice of qualified legal counsel when adapting sample indemnity agreements. The assumption may be that it is appropriate to use these agreements in all situations. You cannot make that assumption. You must consider your particular situation and retain qualified legal counsel when needed or you may have a false sense of security by using a sample indemnity agreement.
The second mistake to avoid is to think that current events do not impact the terms and conditions of a typical indemnity agreement. Recent events such as those in the news are matters that may be best addressed in an indemnity agreement. Rather than using an existing sample indemnity agreement, you can actually rely on that existing indemnity agreement by updating it. Only qualified legal counsel can keep current with changes in the law and the current economic environment. Therefore it is always wise to consult qualified legal counsel about your particular situation and how you can rely on sample indemnity agreements by updating them so they are relevant today.
The third mistake to avoid is to only look at one sample indemnity agreement and consider that to be sufficient simply because you might be unfamiliar as to where to find different types of sample indemnity agreements. A web search will provide you with a variety of sample indemnity agreements to consider. The key is to make sure that you have sample indemnity agreements that would be useful for your particular situation.
Soliciting Legal Assistance of Professionals to Draft Indemnity Agreements
Indemnity agreements are legal contracts, and like most contracts, ensuring that the language is precise and protects all relevant parties from unintended consequences is essential to a well-drafted agreement. An experienced lawyer can identify loopholes, conflict of laws issues, and enforceability problems that may not be apparent to the layman, which can save time, money, and hassle later down the road . Firstly, it is worth consulting with a lawyer to draft or at least review a preliminary indemnity agreement because improper wording can have unexpected consequences – like an overly broad waiver or an omission that renders the agreement unenforceable. Secondly, indemnity agreements often involve liability for exorbitant sums of money or the loss of an entire business. Given the stakes, it is well worth the effort to consult with someone licensed to provide legal advice regarding the agreement.