Indemnification Clause
An indemnification clause requires one party to compensate the other for losses, damages, or legal claims arising from specific events, such as IP infringement or a data breach.
In short
- Shifts financial responsibility for a defined category of loss from one party to the other.
- Commonly covers IP infringement, confidentiality breaches, data breaches, and third-party injury or property damage.
- Mutuality -- does it run both ways, or only one direction -- determines how fair it is.
- Frequently carved out of the liability cap entirely, meaning it can be uncapped.
How it works
If Party A agrees to indemnify Party B against IP infringement claims, and a third party sues Party B for using material Party A supplied, Party A covers B's losses -- including legal defense costs -- even though B is the one being sued.
What triggers it
SOWs and MSAs commonly indemnify against intellectual property infringement, breach of confidentiality, data breaches and security incidents, and third-party bodily injury or property damage. Some also cover violation of law. What triggers indemnification -- and what's explicitly excluded -- defines how much real protection it provides.
How ScopeWise checks this
ScopeWise's Legal agent reviews indemnification language for scope, mutuality, and how it interacts with the liability cap elsewhere in the document, flagging one-sided or unusually broad obligations.