Is an indemnity the same as a warranty?

No. A warranty supports a damages claim for breach; an indemnity is a direct promise to pay defined losses, often without proving breach or causation in the usual way.

Should indemnities be capped?

It is negotiated. Indemnifying parties want caps; recipients often carve out IP, data and confidentiality indemnities from the cap.

What is the notice requirement when a third-party claim triggers an indemnity?

Most clauses require prompt written notice; failing to notify in time may reduce or forfeit the right to indemnification if the indemnifying party is prejudiced.

Who controls the defence of a third-party claim under an indemnity?

Typically the indemnifying party, if it accepts the claim promptly and conducts the defence diligently; the indemnified party usually retains a right to approve any settlement.

Can an indemnity cover gross negligence or wilful misconduct?

Contractually yes, but Dutch courts may not give effect to an indemnity that shields a party from the consequences of its own intentional or grossly negligent conduct.

Indemnification Clause

One party agrees to cover specified losses, claims or third-party liabilities of the other party.

What it is

An indemnity is a promise to compensate the other party for defined losses, often third-party claims arising from IP infringement, data breaches or negligence. It shifts risk contractually beyond what general damages law would otherwise provide.

Why it matters

Indemnities give a direct, often broader claim than ordinary breach damages and govern who controls and pays for third-party litigation. Their scope and caps can dwarf the contract value, so precise drafting is essential.

How to apply it

Define exactly which losses and claims are covered and any carve-outs.
Set procedure: prompt notice, control of defence, and duty to cooperate.
Decide whether the indemnity is capped or sits outside the liability cap.
Require the indemnified party to mitigate and avoid admitting liability.

Sample wording

The Supplier shall indemnify and hold harmless the Customer against all third-party claims, losses and reasonable legal costs arising from the Supplier's infringement of intellectual property rights.

Negotiation tips

• The indemnifying party should seek a cap and exclude the other party's own negligence.
• The indemnified party should keep IP and confidentiality indemnities uncapped.

Common pitfalls

• Open-ended indemnities with no cap, exposing one party to ruinous liability.
• No defence-control or notice mechanism, leading to disputes mid-litigation.

Legal references

BW 6:74 Damages for non-performance Dutch law
Indemnity vs. warranty distinction (general doctrine)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

Frequently asked questions

Common questions about this clause.