Indemnification

In one sentence

A promise to compensate someone for losses, damages, or legal costs they suffer.

Plain English

Indemnification is a contractual promise where one party agrees to cover the financial losses or legal expenses of another party. Think of it as insurance built into a contract—if something goes wrong and causes harm, the indemnifying party pays for it. This often appears in business deals where one side wants protection against risks the other side creates.

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Example

A construction company agrees to indemnify the building owner for any injuries that occur on the job site caused by the construction crew's negligence. If a worker's mistake injures a visitor, the construction company pays the medical bills and any lawsuit costs.

Used in a sentence

“The vendor's indemnification clause protected the retailer from liability if the product caused customer injuries.”

Related terms

Warranty

A promise that something is true or will work as described.

Damages

Money awarded by a court to compensate a party for losses caused by a breach or wrongdoing.

Remedy

A legal action or payment a court awards to fix a harm or enforce a right after a breach.

Disclaimer of Warranties

A statement that removes or limits the automatic guarantees a seller would otherwise provide.

Liquidated Damages

A fixed amount both parties agree in advance the breaching party must pay.

Reliance Damages

Compensation for losses suffered by relying on a promise, even if no formal contract exists.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.