The Procurement Glossary » Indemnity

Indemnity

Contracts & Legal

Definition

A contractual promise by one party to cover specified losses or liabilities suffered by the other.

Explanation

Indemnities allocate risk: for example a supplier may indemnify the buyer against third-party IP claims arising from its product. They are heavily negotiated because they can carry significant, sometimes uncapped, financial exposure.

Example

The supplier indemnifies the buyer against any claim that its software infringes a third party's patent.

Related terms

• Limitation of Liability — A clause capping the amount or types of loss a party can be held liable for under a contract.
• Warranty — A supplier's assurance that goods or services will meet defined standards, with a remedy if they do not.
• Terms and Conditions (T&Cs) — The standard clauses governing a transaction or relationship, covering rights, obligations, liabilities and remedies.
• Contract — A legally binding agreement between buyer and supplier setting out what will be supplied, at what price and on what terms.

Frequently Asked Questions

What is Indemnity?

A contractual promise by one party to cover specified losses or liabilities suffered by the other. Indemnities allocate risk: for example a supplier may indemnify the buyer against third-party IP claims arising from its product. They are heavily negotiated because they can carry significant, sometimes uncapped, financial exposure.

Can you give an example of Indemnity?

The supplier indemnifies the buyer against any claim that its software infringes a third party's patent.

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