![]() ![]() The seller is therefore in a better position to mitigate losses and liabilities related to the goods than the buyer.ĭrafting and negotiating an efficient indemnification provision benefits both the indemnified and the indemnifying party. The seller has more control over the goods than the buyer, whose principal obligation is to make payment. ![]() Protect itself from damages and lawsuits that are more efficiently borne by the counterpartyįor example, in a sale of goods agreement, the risk that a product injures a third party is more efficiently borne by the seller than by the buyer.Customize the amount of risk it is willing to undertake in each transaction and with every counterparty.Indemnification clauses allow a contracting party to: Why are indemnification provisions important? ![]() Indemnification can also cover direct claims, which are claims or causes of action that one contracting party has against the other. Indemnification, also referred to as indemnity, is an undertaking by one party (the indemnifying party) to compensate the other party (the indemnified party) for certain costs and expenses, typically stemming from third-party claims. They are an essential risk allocation tool between the parties, and as such, they are one of the most commonly and heavily negotiated provisions in a contract. Indemnification clauses appear in nearly all commercial agreements. ![]()
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