What Is an Indemnity Clause? An indemnity clause is a provision in a contract where one party agrees to assume responsibility for certain losses, damages, or liabilities. The “indemnitor” is the party who is agreeing to take on the liability and pay the loss. The “indemnitee” is the party who is protected by the clause. Essentially, an indemnity clause is a mechanism for allocating or shifting risk between the parties. For example, if you are a flooring supplier, and the materials you provide are defective, an indemnity clause might require you to compensate the installer for any damages or legal fees incurred because of the defective material. Conversely, a well-drafted indemnity clause will protect a supplier should the supplier get sued because of an installer’s defective installation. What is tricky is that some clauses shift risk to a party who did nothing wrong.
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