Legal Glossary
Indemnity
A promise to compensate another party for losses, damages, or legal costs they incur.
Legal Definition
Indemnity is a contractual obligation in which one party (the indemnitor) agrees to protect another party (the indemnitee) from financial loss, legal liability, or other harm arising from specific events or actions. An indemnification clause defines who is responsible for paying costs if something goes wrong. In practice, indemnity clauses shift financial risk — the party who agrees to indemnify essentially agrees to pick up the other party's tab for covered losses, including legal fees, settlements, and damages.
In Plain English
An indemnity clause is essentially a written promise: 'If things go wrong in this specific way, I'll cover your costs.' It's used to shift financial risk from one party to another. In a rental agreement, a tenant might indemnify the landlord against claims from the tenant's guests — meaning if your friend is injured in your apartment and sues, you (not the landlord) are responsible for the landlord's legal costs. In employment contracts, employers often indemnify employees for actions taken within the scope of their job. In service contracts, vendors often indemnify clients against IP infringement claims. The direction of the indemnity matters enormously.
Real-World Example
James signs a commercial lease that includes an indemnification clause requiring him to indemnify the landlord against 'any and all claims arising from James's use of the premises.' One of James's employees slips on a wet floor in the rented office and sues the landlord for negligence. Because of the indemnity clause, James — not the landlord — is responsible for the landlord's legal defense costs and any settlement paid to the employee. James then has the right to fight his employee's claim directly.