Indemnification Clause
What it is
An indemnification clause is a promise to cover the other party's losses if certain events occur. "Indemnify, defend, and hold harmless" means you agree to pay their legal costs and any damages — including while the case is ongoing — if a claim arises within the defined scope.
Why it matters to you
Signed without negotiation, this clause can make you responsible for the other side's legal problems even when you had little to do with them. The most dangerous versions have no limit on your exposure and no carve-out for claims caused by the other party's own conduct. You could end up paying for their mistakes.
The aggressive version
This is the kind of indemnification language that appears when the other side has leverage and a lawyer who knows exactly what they're drafting.
Contractor shall indemnify, defend, and hold harmless Client and its officers, directors, employees, and agents from any and all claims, damages, losses, costs, and expenses (including reasonable attorneys' fees) arising out of or related to Contractor's performance of Services under this Agreement, whether or not caused by Contractor's negligence.
What each part does to you
“indemnify, defend, and hold harmless”
Three separate obligations: cover damages, pay legal costs in real time before the case resolves, and release them from future claims. "Defend" is usually the most expensive part.
“and its officers, directors, employees, and agents”
You're indemnifying not just the company but every person inside it. One clause, unlimited potential parties.
“any and all claims, damages, losses, costs, and expenses”
No cap on your financial exposure. If a lawsuit goes badly, you are responsible for the full amount, however large.
“whether or not caused by Contractor's negligence”
This is the most dangerous phrase. You cover their losses even when their own conduct caused the problem. This is sometimes called "broad form" indemnification.
The market standard version
A balanced indemnification clause protects both parties from the other's genuine mistakes without creating open-ended exposure.
Each party (the "Indemnifying Party") shall indemnify the other (the "Indemnified Party") from third-party claims, damages, and reasonable attorneys' fees arising from: (a) the Indemnifying Party's material breach of this Agreement; (b) the Indemnifying Party's gross negligence or willful misconduct. This obligation does not apply to claims caused by or contributed to by the Indemnified Party's own negligence or breach. Each party's aggregate liability under this section shall not exceed the total fees paid in the twelve months preceding the claim.
Your counter-language
Replace the one-sided version with this. It keeps real accountability in place while removing open-ended exposure for things you didn't cause.
Each party shall indemnify the other from third-party claims arising directly from that party's own material breach or gross negligence. This obligation does not cover claims caused or contributed to by the Indemnified Party's actions. Neither party's indemnification obligation shall exceed the total fees paid under this Agreement in the twelve months preceding the claim.
What to ask for
“Can we limit this to claims caused by my own breach or willful misconduct, and exclude anything your own actions contributed to?”
“Can we add a cap on my indemnification exposure, tied to the fees paid under this agreement?”
“Can we make this mutual — so you cover claims from your actions the same way I cover mine?”
Related clauses and guides
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Limitation of Liability Clause
A limitation of liability clause caps the maximum financial exposure of one or both parties if something goes wrong.
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Termination Clause
A termination clause defines how the contract ends: who can trigger termination, under what conditions, what notice is required, and what happens to compensation for work already done.
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10 Red Flags to Watch For in Any Contract
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Indemnification Clause Explained: What It Means and How to Negotiate
Indemnification clauses and hold harmless agreements explained in plain English. Learn what indemnify and hold harmless means, what's risky, and how to negotiate.
ClauseCheck is not a law firm and does not provide legal advice. The clause examples and counter-language on this page are illustrative only and are not a substitute for advice from a qualified attorney. Contract terms vary by context; consult a lawyer before making decisions on any specific agreement.
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