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Indemnification clauses are common in commercial contracts. But, what are they?
Put simply, an indemnification clause is a promise by one party to pay for the losses of another if the offending party causes the other harm.
So, let’s say I’m selling your product and I want you, as the vendor, to indemnify me if a customer names me in a lawsuit (barring my own gross negligence or misrepresentation of the product to the customer). In this context, an indemnification clause makes it clear that you will be held accountable and take the responsibility should a third party sue me.
Indemnity brings in another concept called defense. Which means that not only are you held liable for damages in a potential lawsuit, but you also have to pay for the lawyer to defend me in said lawsuit and you would hold me harmless – meaning you won’t come after me for this issue.
Indemnification clauses are a more fulsome, clearer representation of a shifting of risk than relying on negligence or general breach of contract.
As always, watch the video and feel free to reach out with any questions. Leave a comment or contact me.
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For a deeper dive into and other legal issues vital to the success of your deals and your business, visit me at:
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http://www.cenkuslaw.com
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About me:
My 20+ years of experience in business finance, business law and entrepreneurship have led me to believe that numbers and logic are awesome tools, but understanding human nature and emotions is the first step to business success.
The Cenkus Law Firm provides services related to mergers & acquisitions, general business issues and startups, including founders’ agreements and fundraising. I also consult with entrepreneurs and have invested my own capital as an angel investor.
From 2010-2013 I served as Chief Legal Counsel of a publicly-trade international oilfield services company. From 2001 to 2006 me and a partner founded and built Paragon Residential Mortgage. Paragon was sold to Bridge Investments in 2006.
I hold a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.
Now, I live in Austin, TX with my wife and two kids. I enjoy reading, running, classic movies, great food and wine and some great American football.
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