The Continuing Importance of Well-Drafted Indemnity Agreements Most sophisticated landowners, developers and contractors know enough to ask for a Type I indemnity provision in their contracts. However, even the most well-intended indemnity provision may not afford the protection bargained for in the contract. This is because California applies complex rules of law when interpreting indemnity provisions. This article attempts to take the mystery out of indemnity provisions by explaining how courts interpret them. In addition, this article explains several pitfalls that even the most sophisticated party should be aware of when negotiating indemnity provisions in development and construction contracts.
Indemnity means the obligation resting on one party to make good the loss of another.
The indemnitor is the party who is obligated to pay the loss. The indemnitee is the party who is entitled to receive payment from the indemnitor. Before addressing types of contractual indemnities, it is important to distinguish between two different sources of indemnity law. First, an obligation to indemnify may arise from express language in a contract. This type of indemnity, usually referred to as a contractual indemnity, may also result in the recovery of attorney fees and defense costs in responding to a claim covered by the contract.