Indemnity
A promise by one party to cover another's losses or costs arising from a specified event or claim.
Definition
An indemnity is a contractual or statutory obligation by which one party (the indemnifier) agrees to compensate another (the indemnified) for losses, liabilities, costs or expenses arising from a defined event. Unlike a damages claim, an indemnity does not require proof of breach of contract — the indemnifier pays as soon as the trigger event occurs. Indemnities are common in commercial contracts (where a supplier indemnifies a buyer against third-party intellectual property claims), in insurance policies, and in property transactions (seller indemnities for planning breaches). In employment, settlement agreements commonly include a mutual indemnity against further claims.
In practice
Read indemnity clauses carefully before signing — they can transfer significant financial risk without any fault on your part. Check whether the indemnity is capped, whether it requires notice, and whether it survives termination of the contract. An indemnity in favour of a consumer that removes their statutory rights is unenforceable as an unfair term under the Consumer Rights Act 2015.