contracts
The Indemnity Clause Explained, With a Sample Letter (2026)
What an indemnity means An indemnity is a promise by one party to cover the loss or liability of another. If the indemnifier's actions, or something they are responsible for, causes the other side to suffer a loss, face a claim, or pay a third party, the indemnifier makes good that loss. People meet indemnities in two forms: an indemnity clause inside a contract, and a standalone indemnity letter or deed. The point of an indemnity is to shift a defined risk from one party to another in advance, so that if the risk happens, who pays is already settled. A contract of indemnity is simply a contract in which one person promises to save the other from loss, whether caused by the promisor, a third party, or an event. This page is general information, not legal advice. Indemnity law and enforceability vary by country and state, so confirm your local position. ## A sample indemnity provision ```
INDEMNITY The Supplier will indemnify and hold harmless the Customer against all
losses, claims, damages, liabilities, costs and reasonable legal expenses
that the Customer suffers or incurs arising out of:
(a) the Supplier's breach of this agreement;
(b) any claim that the Supplier's goods or services infringe a third party's intellectual property rights; and
(c) the Supplier's negligence or wilful misconduct. This indemnity does not apply to loss caused by the Customer's own
negligence or breach. The Customer will notify the Supplier promptly of
any claim, let the Supplier control the defence where it chooses to, and
not settle without the Supplier's consent (not to be unreasonably
withheld).
The trigger paragraphs (a) to (c) are the heart of it: they say exactly which risks are covered. The final paragraph is the conduct-of-claims part, which protects the party doing the paying. ## A sample indemnity letter
[Date] To: [Beneficiary name and address] Dear [name], Indemnity in respect of [describe the matter, for example the release of
goods without the original document / a lost share certificate] In consideration of you [doing the thing being requested], I/we agree to
indemnify and hold you harmless against all losses, claims, demands,
costs and expenses that you may suffer or incur as a result of [the
matter]. This indemnity is unconditional and continues until [event / date]. It is
governed by the law of [place]. Signed,
[Name]
[Signature]
[Witness, where required]
- No carve-out for the beneficiary's own negligence or breach.
- Leaving the indemnity uncapped by accident, outside the main liability cap.
- No conduct-of-claims wording, so the payer cannot control a claim it must fund.
- Relying on the words hold harmless alone, without defining what is covered. ## How jurisdiction changes things Indemnities are read strictly in many systems, and some losses, such as a party's own negligence, must be covered in clear words or they are not covered at all. In the United States, enforceability and the treatment of indemnities for one's own fault vary by state. In the United Kingdom, indemnities are construed carefully and interact with rules on penalties and unfair terms. In India, the Contract Act deals expressly with contracts of indemnity. Because the drafting conventions differ, confirm the local approach before relying on an indemnity. ## Keeping indemnities visible Indemnities are easy to give and hard to remember. They sit inside larger contracts, they can be uncapped, and a single broad one can carry more risk than the rest of the deal combined. The work that outlasts signing is knowing which contracts contain which indemnities, whether they are capped, and what would trigger them, so a claim never comes as a surprise. That is the same problem businesses face across all their contracts, which is why drafting, understanding, editing, tracking, and governing a clause like this can live in one AI workspace tuned to how your company contracts and built on Claude, with transparent per-seat pricing, so every indemnity across your agreements is visible in one place. [Adira](https://adiralaw.com) is built around that single-workspace idea for business contracts. For a single clause or letter, the samples above plus local advice are what you need.
Frequently asked questions
- What does an indemnity clause actually do?
- An indemnity clause shifts a defined risk from one party to another in advance. One side promises to cover the other's loss or liability if a stated event happens, such as a breach, a third-party claim, or an intellectual property infringement. If the trigger occurs, who pays is already settled, which is why the trigger and carve-outs matter so much.
- What is the difference between indemnify and hold harmless?
- In many contracts the two are treated as meaning the same thing, a promise to cover loss, and appear together as indemnify and hold harmless. Some read hold harmless as adding a promise not to sue or to shield a party even from its own involvement, but courts interpret it differently by place, so it is safest to define exactly what is covered.
- What is warranty and indemnity insurance?
- Warranty and indemnity insurance, used in mergers and acquisitions, is a policy that covers loss from a breach of the warranties, and sometimes indemnities, in a sale agreement. A buyer can claim against the policy rather than chasing the seller, and a seller gets a cleaner exit. It is a specialist product negotiated case by case on larger deals.
- Should an indemnity be capped?
- Often it should. An uncapped indemnity can expose a party to more risk than the rest of the deal combined, so parties frequently negotiate whether an indemnity sits inside the contract's overall liability cap or stands outside it. The right answer depends on the risk being covered, so it is a key point to settle rather than leave silent.
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