Indemnification Clause template clause

    Updated: 22 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] – Indemnification

    1. The Indemnifying Party shall defend, indemnify, and hold harmless the Indemnified Party and its officers, directors, employees, and agents from and against any and all third-party claims, losses, liabilities, damages, costs, and expenses (including reasonable legal fees) ("Losses") arising out of or in connection with:
    (a) any material breach by the Indemnifying Party of its obligations under this Agreement;
    (b) any negligent or wrongful act or omission by the Indemnifying Party, its employees, agents, or subcontractors; or
    (c) any actual or alleged infringement of a third party's intellectual property rights arising from products, services, or materials provided by the Indemnifying Party.

    2. The Indemnified Party shall:
    (a) notify the Indemnifying Party in writing promptly upon becoming aware of any claim, and in any event within [e.g. 15 Business Days];
    (b) give the Indemnifying Party sole conduct of the defence and any settlement negotiations; and
    (c) provide reasonable assistance and cooperation, at the Indemnifying Party's cost.

    3. The Indemnifying Party shall not settle any claim without the Indemnified Party's prior written consent if the settlement:
    (a) imposes any obligation, restriction, or financial liability on the Indemnified Party; or
    (b) does not include a full release of the Indemnified Party.

    4. The indemnification obligations in this Article shall not apply to the extent that the Losses are caused or contributed to by the negligence, wilful misconduct, or breach of this Agreement by the Indemnified Party.

    5. The obligations of this Article shall survive the termination or expiry of this Agreement to the extent they relate to acts or omissions that occurred during its term.

    What does this clause mean?

    An indemnification clause requires one party to compensate the other for losses arising from third-party claims connected to the indemnifying party's conduct. Unlike a standard damages claim between contracting parties, indemnification covers the full cost of defending and settling external claims, including legal fees.

    The clause is particularly valuable in outsourcing and technology contracts. If a supplier provides software that infringes a third-party patent, the buyer may face an expensive lawsuit. Without an indemnification clause, the buyer must prove its own loss and then pursue the supplier separately. With indemnification, the supplier takes over the defence and bears the cost directly.

    Paragraph 2 sets out procedural requirements. Failing to notify the indemnifying party promptly, or failing to give it control of the defence, can void the indemnification obligation entirely. Weshare (2025) found that 95% of organisations lack full visibility into their contractual obligations, which means notice obligations under indemnification clauses are frequently missed when a claim arrives unexpectedly.

    When should you use this clause?

    Include an indemnification clause in any contract where one party's actions could expose the other to third-party claims. This applies particularly to outsourcing agreements, technology development contracts, distribution and reseller agreements, and service contracts involving subcontractors.

    For intellectual property indemnification, consider whether the indemnifying party has sufficient insurance coverage and financial capacity to fund a defence. An indemnification from an under-resourced supplier against a large patent claim may be commercially worthless without adequate backing.

    According to World Commerce & Contracting, 9.2% of annual revenue is lost each year through poor contract management. Third-party claims that an organisation is forced to handle alone — because the indemnification clause was missing or ambiguous — are a direct and preventable contributor to that figure.

    Customize these elements

    • 1Define precisely which categories of third-party claims are covered, and exclude those that fall outside the indemnifying party's reasonable control
    • 2Set a notification deadline in paragraph 2(a) and specify whether late notification results in partial or complete loss of indemnification rights
    • 3Include a settlement control mechanism requiring the indemnified party's approval for any settlement that imposes obligations on it
    • 4Consider whether indemnification obligations should sit outside the overall liability cap established elsewhere in the contract
    • 5Verify that the indemnifying party carries professional indemnity or product liability insurance adequate to support the indemnification obligation in practice

    Sources

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