Llc indemnification clause

Our Prices Are Up Front And We Include More As Standard In Our LLC Packages! What does that indemnification clause mean in your contract? Is your indemnification provision enforceable?

Can any agreement include an indemnification clause? In most cases, these clauses are used to make sure that a potential loss will be compensated.

If you are the party covered by this clause, it means that the other contractual party is promising to compensate you if their actions cause you to suffer a loss. An indemnification provision, also known as a hold harmless provision, is a clause used in contracts to shift potential costs from one party to the other. In a mutual indemnification , both parties agree to compensate the other party for losses arising out of the agreement to the extent those losses are caused by the indemnifying partys breach of the contract. In a one-way indemnification , only one party provides this indemnity in favor of the other party.

The primary benefit of an indemnification provision is to protect the indemnified party against losses from third party claims related to the contract. They are typically used in agreements where the risks associated with a partys non-performance, breach, or misconduct are high. Indemnification provisions are generally heavily negotiated (and often heavily litigated) clauses.

For example, agreements that involve the sale of intellectual property rights often include an indemnification by the seller in order to protect the buyer against the potentially large liability associated with an infringement lawsuit by a third party.

See full list on nolo. The following is an example of a basic mutual indemnification provision. Remember, any indemnity must be tailored to your specific needs.

Lets say you commission a writer to prepare a speech for you on a work-for-hire basis. Instead of delivering an original speech as promised under the contract, the writer incorporates passages from a speech by another person who then sues you for copyright infringement, claiming that his intellectual property was exploited without his consent. Your agreement with the writer includes a representation and warranty that the work product provided under the contract is original. It also has a standard indemnification provision that promises to hold you harmless from any losses or damages, including attorney fees, incurred as a result of any breach of the agreement. Pursuant to the indemnity, the writer would be obligated to handle the legal defense related to the other writers intellectual property infringement lawsuit against you and cover all of the losses and expenses you incur as a result of the infringement claim.

You would want to include additional language depending on your circumstances. For example, an indemnification can be limited to specific third party claims (such as those related to a breach of warranty), or restricted to only those situations where a lawsuit has been filed or a final judgment has been rendered. If you are the party providing the indemnification , you will want to make sure the clause is as narrowly tailored as possible to protect against the specific risk it is intended to protect against. There are certain exceptions however.

Certain states also prohibit indemnification provisions that provide for punitive damages. Check all applicable laws before drafting an indemnity. Additionally, courts have commonly held that a plaintiff may not recover damages under an indemnity clause to the extent that the damages are an unforeseeable and improbable outcome of the other partys breach, negligence, or misconduct (unless it can be shown that the indemnifying party had knowledge of the relevant circumstances).

They should be broad enough to sufficiently address the parties concerns, yet reasonable and equitable in all respects so that their enforceability is not called into question. In an LLC, indemnification is completely discretionary and the scope of indemnification , if any, can be defined in the LLC’s Operating Agreement.

Often, an Operating Agreement will provide broad indemnification, providing that indemnification, subject to the exceptions discussed below, will cover losses, damages and. Indemnity can also refer to a legal exemption from loss or damages , as in the case of an indemnity clause in a contract , in which one party agrees to take the liability for loss or damage from another party. An indemnity clause requires one or both parties to an agreement to defend the other party and potentially pay any claims or lawsuit settlements or judgments.

This responsibility can include an. Each Party shall defend indemnify and hold harmless the other Party, including Affiliates and each of their respective officers, directors, shareholders, employees, representatives, agents, successors and assigns from and against all Claims of Third Parties, and all associated Losses, to the extent arising out of (a) a Party’s gross negligence or willful misconduct in performing any of its obligations under this Agreement, or (b) a material breach by a Party of any of its representations. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now! Create An Indemnity Agreement In Half The Time.

Legally defined as, “to make reimbursement to one of a loss already incurred by him,” an indemnity clause states that one party agrees to “indemnify the other party,” or absorb the losses caused by the other party. It does so by creating the obligation that one party (the Indemnitor) will pay for losses the other party becomes liable for (the Indemnitee), either for any losses related to the agreement, or for losses from certain types of claims. The indemnity clause shifts “third party” risks from one contracting party to the other. Many indemnification clauses address this problem by including language specifying that the indemnity covers losses “to the extent” caused by or resulting from the actions of the indemnifying party. This is certainly helpful, but a more explicit statement of the intent of the parties can avoid any doubt on the issue.

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