What is Indemnity and How Can a Business Lawyer Help?
Business Owners and Legal Matters: Understanding Indemnity and Liability2 min read
When it comes to legal matters, business owners often don’t know the difference between indemnity and liability - or even what indemnity is. Despite its potential to protect their business or assets, too many business owners don’t even understand what indemnity is and why it’s so important. Understanding indemnity is crucial for businesses to protect themselves and to understand what they’re signing when entering into contracts.
Indemnity is defined as a legal agreement between two parties, the parties being the indemnitor and the indemnitee. It ensures the indemnitor covers any losses, damages, or expenses incurred by the indemnitee due to a legal claim. When a business includes indemnity provisions in their contracts, they are offering a promise to cover any costs associated with a legal claim made against them.
It’s important for business owners to understand what indemnity does and how it functions in a legal context. Indemnity isn’t just something you can sign without understanding what it means. A business lawyer can help those looking to sign an indemnity document understand how it works and what risks and responsibilities it involves.
One of the primary reasons businesses should seek legal counsel when signing an indemnity document is to avoid any overreaching language. Overreaching language leaves a business exposed to unnecessary and potentially costly risks, and without a legal expert to review the document, these may be overlooked.
Using an experienced business lawyer from UpCounsel to review an indemnity document is always a good idea, especially in the case of a local New York business. Since local laws and regulations can differ from those of other states, a New York business needs to ensure their documents are prepped for the local market.
In some cases, indemnity provisions can be unfair or unenforceable. An experienced and knowledgeable lawyer can ensure everything is Fair, Accurate, Reasonable, and Enforceable (FARE).
Another task a business lawyer can help with is determining the scope of indemnity and defining certain exclusions. This helps to limit what the indemnitor is liable for. Exclusions can be based on pre-existing conditions and specific situations in which the parties agree the indemnitor isn’t liable.
As indemnity documents are incredibly important legal documents, their preparation and review should not be taken lightly. It’s always a good idea to double-check with a business lawyer before signing an indemnity document. A lawyer can provide clarity to indemnification language and find discrepancies to ensure that a business is sufficiently protected.
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