Hold Who Harmless? Be Careful In Drafting Indemnity Provisions

In another example that there is no "boilerplate" in commercial real estate documents, the California Court of Appeal recently held that an indemnity provision not only covered claims by third parties, but it also covered direct claims by the parties to the contract. The court also honored the agreement's tight integration clause and refused to admit any extrinsic evidence to interpret the deal whatsoever.

In Hot Rods v. Northrop Grumman Systems Corp., the parties entered into an agreement for the sale of commercial property in Anaheim that Northrop once used as a facility to manufacture floor beams for its Boeing 747 aircraft. Prior to entering into the sale, Northrop had discovered, through environmental testing, that the property had several areas of concern, including groundwater contamination. While testing continued, Northrop entered into an agreement for the sale of the property, which would be used for an auto parts business. The 9.5-acre property sold for