What is an indemnity clause?

An indemnity clause is a legal term found in contracts between two or more parties. It is used to protect one party, usually the one paying the money, from certain losses they might incur due to the actions of the other party. In California, an indemnity clause requires the party receiving payment to compensate the other party if they are found liable for any damages related to the agreement. The purpose of an indemnity clause is to transfer risk from the paying party to the receiving party. This is especially important when the paying party is in a more vulnerable position, such as when a company is hiring an independent contractor. In this case, the indemnity clause can protect the company from having to pay out any damages resulting from the contractor’s negligence or incompetence. An indemnity clause is important for both parties, as it helps to reduce the risk of any potential disputes or disagreements. The clause typically details what events are covered by the indemnity agreement and what damages the paying party is protected from. This information should be clearly stated in the contract so both parties understand what they are responsible for.

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