Negotiation Of Indemnity Provisions

We come across indemnity provisions in invariably in all commercial contracts with a significant stake or subject matter value. An indemnity provision is primarily designed to mitigate risk of one party and affix the same risk as a liability upon other party.

Thus, indemnity provision seeks to provide comfort to a party by protecting it from economic hardships, risks and liabilities and impose the cost of such protection on the other party. How this respective allocation of comfort and liability would take place depends on negotiation and drafting.

Indemnity provision can be drafted as a mutual or unilateral provision. Under mutual provision, liability will be on either party (indemnifying party) to indemnify the other party (indemnified party) from certain actions of former party, third party claims and expenses, etc. In a unilateral provision liability will be only on the party which agrees to indemnify and protection will be provided to the other party which