CONTRACTUAL INDEMNITY AGREEMENTS – AN OVERVIEW

So you are presented with a contract from a customer or vendor. It contains a provision in the contract concerning indemnity. It is written in lengthy legalize with multiple run on sentences that would make a high school English teacher have a conniption. You sense that it is important, but because it is hard to decipher, you skip over it and focus on the “important” stuff like payment, description of the product or services, etc…

Don’t ignore it!!! It could wind up being the absolute most important provision in the contract. There are so many implications to an indemnity agreement that it is impossible to cover them all in this blog. But in short, it can have implications on your insurance coverage, it can bind you to essentially become the other party’s insurance company and it can require you to pay for the other party’s attorney and expert.

An indemnity provision in a contract is essentially an agreement to pay the other party’s damages in the event a third party brings a claim. Indemnity agreements can be drafted very broad to cover multiple scenarios or they can be narrow and only encapsulate certain specific circumstances. A shortened version of a broadly drafted indemnity looks like this:

Smith will indemnify, defend and hold harmless Jones from any and all claims, damages, demands and actions that arise out of or relate to any acts or omissions that relate to the project in which Smith is providing services, whether or not Smith contributed to the damages claimed.

This sample is merely just that, a sample. Even a shortened version like this one can be difficult to decipher by a non-lawyer. It is even difficult for lawyers to decipher, if they do not regularly review these types of provisions.

I have personally seen indemnity agreements require one party to indemnify the other party for the other party’s own negligence. This is essentially an insurance contract. And yes, in Florida, these are legal in construction contracts, provided the required statutory language is included. Courts look at indemnity agreements as merely a contract. If one party is contractually responsible to pay for the other party’s damages, courts are inclined to enforce the agreement.

The point of this blog is to get you to refrain from merely glossing over such a provision, no matter how lucrative the potential contract would be. The prospect of entering into a financially advantageous contract can be significantly outweighed by the liability you may unknowingly be taking on.

Here at Jones Law Group, we have over a decade of experience reviewing and revising indemnity provisions and contracts. Call us at (727) 571-1333 during regular business hours or (727) 753-8657 on weekends or after regular business hours. We can help you explain and negotiate with the other side to revise the agreement.

Jones Law Group
5622 Central Avenue
St. Pete, FL 33707