Indemnification
A contract clause where one party agrees to cover the other's losses if certain things go wrong - a core way agencies and clients allocate risk.
For example, an agency might indemnify a client against claims that its delivered work infringed someone's copyright, while the client indemnifies the agency for content the client supplied. Each side covers the risks it controls.
Why it matters to agencies: indemnification decides who pays when something goes wrong, so it is one of the most important - and most negotiated - clauses in any agency contract. Uncapped indemnities can be business-ending, which is why they are usually paired with a liability cap.
- Accepting uncapped indemnification.
- Agreeing to one-way indemnity in the client's favour only.
- Signing without understanding what you are on the hook for.
What is indemnification?
A contract clause where one party agrees to cover the other's losses if certain things go wrong - a core way agencies and clients allocate risk.
What does indemnification mean in an agency contract?
One party agrees to cover the other's losses or legal costs if a defined risk - like an IP claim - materialises.
Why should agencies cap indemnification?
An uncapped indemnity can exceed the project's value many times over; a cap, often tied to fees paid, keeps the risk survivable.
Where does indemnification sit in a contract?
Usually in the MSA or main contract, alongside liability, warranties and IP terms.