Indemnity Clause

An indemnity clause is a contractual commitment where one party (the indemnifying party) promises to compensate and hold harmless the other party (the indemnified party) for specified losses, legal claims, damages, or liabilities arising out of a breach or specific event.

Legal Enforceability Under Indian Law

Governed by Section 124 and Section 125 of the Indian Contract Act, 1872. Unlike damages under Section 73 (which require proof of actual loss and mitigation), an indemnity allows recovery of indirect losses and legal costs if explicitly drafted.

Standard Sample Clause Language

The Service Provider ("Indemnifying Party") agrees to defend, indemnify, and hold harmless the Client, its directors, officers, and employees from and against any third-party claims, liabilities, losses, damages, and reasonable legal costs arising out of: (a) Infringement of any third-party intellectual property rights by the deliverables; (b) Gross negligence or willful misconduct of the Service Provider; or (c) Material breach of confidentiality or applicable data protection laws.

Common Drafting Pitfalls to Avoid

✕Failing to tie indemnity to an overall Limitation of Liability cap.
✕Omitting standard carve-outs (e.g., client's own unauthorized modifications to deliverables).
✕Not including a mandatory prompt notice procedure for third-party claims.

Frequently Asked Questions

Can an indemnity clause cover consequential or indirect damages in India?

Yes, under Indian law, if the indemnity clause explicitly encompasses indirect, consequential, or third-party legal liabilities, courts will enforce the plain commercial agreement between corporate entities.

Related Commercial & Legal Terms

Limitation of Liability (LoL) →

A contractual risk-allocation provision that caps the maximum financial damages one party can recover from the other in the event of a breach, and excludes indirect, punitive, or consequential damages.

Liquidated Damages →

A predetermined, genuine pre-estimate of loss agreed upon by the contracting parties at the time of signing, payable as compensation in the event of a specific contractual breach (such as delivery delay).

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