Contract clause

What Does Indemnification Mean in a Contract?

Indemnification means one party may have to cover losses, claims, or legal costs for the other party.

Plain English meaning

An indemnification clause shifts risk. If a covered claim happens, one party must pay for the other party’s losses, defense costs, settlements, or judgments. The dangerous part is scope: broad indemnity language can make you responsible for problems you did not directly cause.

Why it matters

It can include attorney fees, not just damages.
It may apply to third-party claims or direct claims.
It can survive after the contract ends.

Where it appears

NDAs
Employment agreements
Vendor contracts
Service agreements
Commercial leases

Watch for

Indemnity for the other party’s negligence
No liability cap
Defense obligations
One-way indemnity

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Common questions

Is indemnification the same as liability?

No. Liability is responsibility for a loss. Indemnification is a promise to cover specified losses or claims for someone else.

Should I sign a broad indemnification clause?

Be careful. Broad clauses can make you pay for claims, attorney fees, and settlements beyond what you expected.