What is the meaning of indemnity in a contract?
In North Carolina, indemnity is a legal concept that refers to a clause in a contract that establishes one party’s responsibility to protect the other party against losses or damages. Indemnity is also referred to as a “hold harmless” clause. This clause typically requires the indemnifying party to accept responsibility for legal liability for damages incurred as the result of the actions of either party. Indemnity can be developed either through express language in a contract or by implication if the contract is silent on the matter. The party offering indemnity is usually required to pay for any legal fees, judgments, and other associated costs arising out of the matter. It is important to understand that an indemnity obligation is not guaranteed without a written agreement; this agreement must be signed by both parties. Indemnity agreements usually arise in various business transactions, such as contracts between landlords and tenants, employers and independent contractors, and suppliers and purchasers. These agreements can also be used in professional services contracts. All parties should understand the risks of entering into an agreement in which indemnity is included, as it could potentially create a financial burden for one of the parties.
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