The indemnity clause in a non-disclosure agreement (NDA) under Singapore law

Standard Position

Indemnity clauses in Singapore NDAs are less common than in other jurisdictions, but when included, they typically require one party (the indemnifying party) to compensate the other (the indemnified party) for losses arising from breach of confidentiality obligations or misuse of disclosed information. Under Singapore contract law, indemnity is a contractual obligation separate from damages claims and must be expressed clearly to be enforceable. The standard market position is for the disclosing party to seek indemnity protection against losses caused by the receiving party's unauthorised disclosure, breach of security obligations, or misuse of confidential information. However, many NDAs in Singapore omit indemnity altogether, relying instead on breach of contract remedies and equitable relief (injunction, account of profits). Where included, indemnity is often qualified by carve-outs for gross negligence, wilful misconduct, or breach of duty on the part of the indemnified party.

Legal Basis

Singapore contract law recognises indemnity as a contractual mechanism governed by the principles of offer, acceptance, and consideration. There is no statutory definition of indemnity in Singapore; instead, the courts apply common law principles developed in English law, as Singapore inherited and continues to apply the English common law framework. Key authority includes the principle that indemnities must be clearly expressed to be enforceable: the court will not imply an indemnity unless the language is explicit. The Unfair Contract Terms Act (UCTA) 1977, which applies in Singapore, restricts the enforceability of indemnity clauses in certain contexts (for example, indemnifying a party against liability for their own negligence causing death or personal injury is void). However, for commercial NDAs between sophisticated parties, UCTA limitations are less restrictive. The burden of loss allocation in indemnity clauses is a matter of contractual intent, not statutory default.

Drafting and Negotiation

When drafting indemnity in a Singapore NDA, be explicit about the scope, triggers, and limitations. Define precisely what losses are covered: does indemnity apply only to third-party claims, or also to direct losses? Specify whether it covers legal costs, investigative costs, and remediation expenses. Include a clear trigger: for example, indemnity applies only if the receiving party breaches a specific confidentiality obligation (not all breaches generally). Consider whether indemnity is capped (for example, to the value of the information disclosed or a fixed sum) and whether it excludes losses that could have been mitigated. Negotiate carve-outs: most receiving parties will resist open-ended indemnity and will seek to exclude liability for losses arising from the disclosing party's negligence, failure to mitigate, or breach of their own confidentiality duties. Agree on notice requirements: the indemnified party should notify the indemnifying party promptly of any claim or loss triggering indemnity, and the indemnifying party may wish to reserve a right to defend or settle claims. In Singapore practice, mutual indemnities are rare in NDAs; instead, one-way indemnity (protecting the disclosing party) is more typical.

Common Pitfalls

One common mistake is to draft indemnity so broadly that it becomes unenforceable or disproportionate. For example, an indemnity covering "any and all losses" without limitation may be seen as unreasonable between sophisticated commercial parties and could invite challenge. Another pitfall is to omit the trigger: if the indemnity clause does not specify what conduct gives rise to indemnity (for example, breach of Article 2, unauthorised disclosure to third parties), a court may decline to enforce it or construe it narrowly. Failing to include a cap or time limit can expose the indemnifying party to indefinite liability. Additionally, many drafters forget to address the interaction between indemnity and other remedies (damages, injunction, termination rights): clarity on whether indemnity is exclusive or cumulative is essential. Finally, some NDAs include indemnity for breaches by employees or agents of the receiving party without clearly allocating responsibility for supervision and control, leading to disputes over causation and liability.

Sample language

The Receiving Party shall indemnify, defend, and hold harmless the Disclosing Party from and against any third-party claims, damages, and reasonable costs (including legal fees) arising directly from the Receiving Party's unauthorised disclosure of Confidential Information in breach of Article 2, provided that the Disclosing Party gives written notice of such claim within thirty (30) days of becoming aware of it and the Receiving Party is afforded a reasonable opportunity to defend or settle the claim. This indemnity shall not apply to the extent that losses result from the Disclosing Party's gross negligence or failure to mitigate.

This is general drafting guidance, not legal advice, and not a substitute for advice on your specific facts and jurisdiction. Sample language is a starting point to adapt, not a finished clause.