Indemnity
Contract Law

An indemnity is a promise to make good the loss sustained by a person as a consequence of an act or omission of another - it is an express promise to compensate for defined loss or damage are used to contracts (in addition to warranties) to ensure that a contracting party has an express remedy to correct defects in goods or services delivered under the contract. Without an indemnity, a person will be left with their usual rights for breach of contract to recover the specified loss, if on the construction of the agreement relief is available.

Indemnities are usually set up with reference to specific conduct, and avoids difficulties with remoteness of damage when recovering loss when properly drafted.

In contracts that involve the creation of intellectual property rights and provision of services (for instance software development contracts), it is customary to include an intellectual property indemnity so that the person receiving the services may recover their losses in the event that the provider infringes a third party's intellectual property property rights in the production of the deliverables under the contract. To take an obvious example, if a party to a contract were to deliver another person's software (without their permission) under a contract, the contracting procuring those services would infringe that other's software by using it, and be liable for copyright infringement and damages to that other person. An indemnity would entitle the procuring party to sue the supplier of the software for the losses occasioned by the infringement.

An example of an indemnity, would read as follows: "The supplier undertakes that it will indemnify and hold harmless the customer against all proceedings, costs, expenses, liabilities, injury, death or damages arising from negligent performance or breach or failure of performance by the supplier of the terms of this agreement".