Indemnity Explained: What You Need to Know to Protect Your Business in New York
Indemnity agreements are an important part of business contracts2 min read
Indemnity agreements are an important part of business contracts. They are used to protect a party from potential financial losses due to another party's wrongful actions, such as negligence, securities fraud, or breach of contract. In New York, indemnity agreements are especially powerful due to a unique mixture of state laws. To ensure your business is protected, it is important to understand how these agreements work and how New York state laws may affect them.
Indemnity agreements are an agreement between two or more parties where one party agrees to pay for the other party's potential liability in the event of wrongdoing. Such an agreement can be an essential part of any contract in the business world, as it provides protection from unforeseen losses or damages. Generally, it is the duty of the indemnifying party to protect the indemnitee from losses arising out of an act, omission, or other breach of the agreement.
In New York, the rights and obligations of parties to an indemnity agreement are typically governed by state statutes. New York General Obligations Law Section 5-322, for instance, lays out the rights of a party to an indemnity agreement. According to the statute, the indemnifying party is obligated to pay all costs and liabilities incurred by the indemnitee resulting from a party's breach under the agreement. Furthermore, Section 5-322 limits the indemnifying party's exposure to no more than the amount specified in the indemnity agreement.
New York courts also have the authority to modify the terms of an indemnity agreement to ensure each party's rights are adequately protected. For example, in BNY Mellon, N.A. v. BNP Paribas LLC, the Court reviewed the indemnity agreement and found it was not validly amended to include indemnification for claims arising from breach of contract. The court then modified the agreement to allow such an indemnity. This case serves as an example of how state law can be used to interpret the terms of an indemnity agreement and ensure adequate protection.
Understanding the nuance of indemnity law in New York is essential for businesses seeking to mitigate risk associated with contract performance. By consulting with a knowledgeable New York business attorney, business owners can craft an indemnity agreement that ensures they are adequately protected from potential financial losses.
At UpCounsel, we understand the importance of adamant legal protection. Our network of experienced attorneys offers comprehensive legal services to small and large businesses alike. So, if you're seeking to protect your business with an indemnity agreement or if you need help to resolve an indemnity dispute in New York, contact UpCounsel today.