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Help Guide

A indemnity agreement is an excellent way to help parties accomplish their goals by better dividing responsibility for legal risks. This help guide provides clarification on some of the key aspects of your document.

What Is Indemnification and Hold Harmless?

When these terms are discussed independently of each other, they have separate meanings. Indemnity is a contractual obligation to repay an indemnified party (the indemnitee) any actual losses that party may incur. The implication of this is that the indemnitee must actually have incurred a quantifiable loss before the obligated party (the indemnitor) is bound to pay. Such losses normally occur where the indemnitee loses a lawsuit or receives a fine.

Hold harmless is similar to indemnity but goes further. Instead of just being responsible for actual losses, the indemnitor must assume all liability and costs that the indemnitee has incurred. This contractual duty remains even if there is no judgment passed or fine given. Even though there is a difference between indemnity and hold harmless, in practice most courts now consider them to be essentially the same thing.

Broad Indemnity

Broad indemnity is the most extensive form of indemnity there is. With broad indemnity the indemnitor assumes all risk and liability no matter who is at fault. This form of indemnity is seen as the most beneficial for the indemnitee, but very risky for the indemnitor. The level of risk for the indemnitor is so high that some states, such as California, do not even allow this level of indemnity to take place. Other states will not allow broad indemnity for certain types of contracts.

Intermediate Indemnity

Intermediate indemnity is the most common form of indemnity. With intermediate indemnity the indemnitor assumes liability if it has contributed to the fault. If the indemnitee is solely at fault, the indemnitor is not liable. However, if even partly at fault, the indemnitor still must assume all liability.

Limited Indemnity

Limited indemnity offers the least protection to the indemnitee, and there are some that do not believe that it should even be a class of indemnity. Limited indemnity holds the indemnitor liable for the portion of fault they are responsible for. This form of liability would exist under tort law even without an indemnity agreement. However, some parties like to formalize this arrangement in writing.

Defense Requirement

The requirement for the indemnitor to actively defend against claims against the indemnitee varies from state to state. For example, the assumption in California is that the indemnitor will automatically have the responsibility of defending any claims, whereas in Illinois the duty to defend must be agreed to as a separate contractual obligation. By including this requirement, the language in LegalNature's indemnity agreement firmly places the duty to defend on the indemnitor. The defense language also requires the defending party to seek consent before settling any claims.

Executing Your Indemnity Agreement

If the indemnity agreement is being executed in conjunction with another contract, the indemnity agreement should either be executed before or at the same time as the other contract. Once the indemnity agreement has been completed, simply have all parties sign and date to complete the document. Although not required, it is always a good idea to have the document notarized for extra protection.

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Step 1: Gather Information

As you complete your indemnity agreement, you will need to provide certain relevant information. This includes the name and address of each party and the date your agreement should go into effect.

Step 2: Answer Key Questions

Use the information you collected to complete the indemnity agreement. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected.

Step 3: Review and Sign

It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads are available by navigating to the Documents section of your account dashboard.

When signing the document, be sure to follow any additional instructions related to signing and witnessing the document. Any such instructions will either be located next to the signature line or in the instructions attached at the end of the document.

Although using a notary is not required, it is recommended that you do so to ensure that you can prove the authenticity of the document. When using a notary, be sure to wait to sign the document until they are present.

Step 4: Distribute and Store Copies

At a minimum, all parties that sign the document should receive a copy once it is fully executed (everyone has signed). Other interested parties may need or want copies as well. Be sure to store your copy in a safe location. It is a good idea to keep both a physical and electronic copy.

Step 5: Periodically Review and Update

It is easy to forget the ins and outs of your indemnity agreement. Periodically reviewing it will help you stay familiar with any responsibilities or requirements so that you can determine when it needs changes or additions.

Over time you may need to make changes and updates to the contract. Using a contract amendment allows you to specify your changes without having to create an entirely new agreement. This is helpful when you only need to make a few changes instead of a complete overhaul of the language.

Should you decide to create a completely new indemnity agreement, LegalNature makes this process easy by saving your answers to the original agreement within the questionnaire.

Step 6: Complete Related Documents

Completing an arbitration agreement will help ensure the parties are fully protected. For example, if your current agreement does not include a dispute resolution process, then you should use an arbitration agreement to create an agreed upon process for existing or future disputes between the parties. LegalNature's agreement helps you do this by allowing you to choose between common structures for resolving disputes.

Ready To Get Started? Create an Indemnity Agreement