Sub-topic 2: Types of Indemnification: General, Specific, and Third-Party Claims

Indemnification clauses are crucial for allocating risk in contracts. Understanding the different types of indemnification is key to effectively drafting these provisions and ensuring appropriate risk management. This section explores general, specific, and third-party claims indemnification.

General Indemnification

General indemnification is a broad promise where one party (the indemnitor) agrees to protect the other party (the indemnitee) from any and all losses, damages, liabilities, and expenses arising out of the contract or the indemnitor's actions related to it. This is often the most comprehensive form of indemnification.

Specific Indemnification

In contrast to general indemnification, specific indemnification clauses are narrowly tailored to cover particular risks or events. These are often used to address known or anticipated liabilities that are unique to the transaction or the parties' relationship.

Third-Party Claims Indemnification

Third-party claims indemnification specifically addresses situations where a party is sued by an entity that is not a party to the contract (a 'third party'). The indemnitor agrees to cover the indemnitee's losses resulting from such external claims.

Type of Indemnification	Scope	Focus	Example Use Case
General	Broad, all-encompassing	Any and all losses arising from the contract	High-risk contracts where unforeseen issues are likely
Specific	Narrow, defined	Particular risks or events explicitly listed	Addressing known liabilities or unique transaction aspects
Third-Party Claims	External claims	Lawsuits brought by non-parties to the contract	Intellectual property disputes, product liability

When drafting indemnification clauses, always consider the interplay between general and specific provisions. A well-drafted contract often uses both to provide comprehensive yet precise risk allocation.

Key Considerations for Drafting

When drafting these provisions, several factors are critical:

Clarity of Language: Ambiguity can lead to disputes. Use precise terms.
Scope of 'Losses': Define what is included (e.g., attorneys' fees, consequential damages).
Causation: Specify the link required between the indemnitor's actions and the loss (e.g., 'arising out of,' 'caused by,' 'resulting from').
Exclusions: Clearly state what is not covered.
Notice Requirements: Outline how and when notice of a claim must be given.
Defense Obligations: Specify who controls the defense of a third-party claim.

What is the primary difference between general and specific indemnification?

General indemnification is broad and covers all losses arising from the contract, while specific indemnification is narrow and covers only explicitly listed risks or events.

What type of indemnification is most relevant when a party faces a lawsuit from an entity not involved in the contract?

Third-party claims indemnification.

Learning Resources

Understanding Indemnification Clauses in Contracts(blog)

This article provides a comprehensive overview of indemnification clauses, their purpose, and common pitfalls to avoid during drafting.

Indemnification: What It Is and How It Works(wikipedia)

Investopedia offers a clear explanation of indemnification, its legal implications, and how it functions in various contractual contexts.

Drafting Indemnification Clauses: Key Considerations(blog)

This legal blog post delves into the practical aspects of drafting effective indemnification clauses, highlighting essential elements and potential issues.

The Basics of Indemnity Agreements(documentation)

Nolo provides accessible legal information, explaining indemnity agreements and their significance in protecting parties from financial loss.

Contract Law: Indemnity Clauses(documentation)

Cornell Law School's Legal Information Institute offers a concise legal definition and explanation of indemnity clauses within contract law.

When to Use Indemnification Clauses in Your Contracts(blog)

Rocket Lawyer explains the scenarios where indemnification clauses are beneficial and how they help manage risk in business agreements.

Understanding Third-Party Indemnity(blog)

This article focuses specifically on third-party indemnity, detailing its importance in protecting against claims from external parties.

Contract Drafting: Indemnification Provisions(paper)

A publication from the American Bar Association discussing the strategic use and drafting of indemnification provisions in commercial contracts.

Common Indemnification Clause Mistakes(blog)

This resource highlights frequent errors made when drafting indemnification clauses, offering insights to avoid them and ensure enforceability.

The Purpose and Scope of Indemnification in Contracts(blog)

This article explores the fundamental purpose of indemnification in contracts and discusses how to define its scope effectively to manage risk.