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 your firm: 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.
Common mistakes
- Accepting uncapped indemnification.
- Agreeing to one-way indemnity in the client's favour only.
- Signing without understanding what you are on the hook for.