Reviewing an indemnity clause

An indemnity is a promise to pay for a loss on a pound-for-pound basis, without the party claiming having to prove breach, causation or the remoteness rules that limit a damages claim, and without the duty to mitigate that reduces one. That is the difference between an indemnity and a damages claim. An indemnity drafted for 'any and all losses arising from' a subject is wider than any liability the law would otherwise impose. I review the clause from whichever side instructs me and return it marked up with a written explanation of what it covers, what it would cost, and the changes the other side will accept, for a fixed fee of £495 in three working days.

Who this is for

Suppliers, contractors, consultants and licensors in England and Wales asked to give an indemnity, and customers, licensees and clients asking for one, in a services, software, supply, licence, agency, construction or outsourcing contract. Both parties are businesses; an indemnity imposed on a consumer is subject to the reasonableness test in the Unfair Contract Terms Act 1977 and the fairness test in the Consumer Rights Act 2015.

What to look for in an indemnity clause

What an indemnity does that a damages claim does not

A claim for damages for breach of contract requires the claimant to prove breach, causation and that the loss was not too remote, and to mitigate, and is subject to the contract's cap; a claim under an indemnity is a claim for a debt, for the loss the indemnity describes, and the remoteness and mitigation rules apply only so far as the wording brings them in. The limitation period runs under section 5 of the Limitation Act 1980 from when the indemnified loss is established rather than from the breach. The review explains what the indemnity in hand adds to the ordinary remedies, which is the measure of what the indemnifier is giving away.

The trigger and the losses covered

The clause should say what event triggers the indemnity (a third-party claim, a breach of a specific obligation, a specific risk such as infringement or data loss) and what losses it covers (damages awarded, settlements, legal costs, the indemnified party's own costs and losses). The review narrows a wide indemnity to defined triggers and to losses that are reasonable, evidenced and caused by the trigger, and for a party receiving an indemnity checks that the trigger covers the risk it is buying protection against, with costs included.

Third-party claims and the conduct of the claim

An indemnity for third-party claims, for infringement of intellectual property, for injury or for a regulator's action, should carry a procedure: prompt notice of the claim, the indemnifier's right to take over its defence and settlement, the indemnified party's obligation not to admit liability or settle without consent, and cooperation. The review adds the procedure where it is missing, since an indemnifier that cannot control the claim is paying for someone else's litigation, and checks that a third party cannot enforce the indemnity directly, which section 1 of the Contracts (Rights of Third Parties) Act 1999 allows unless excluded.

Whether the indemnity is capped, and whether it should be

Customers put indemnities outside the limitation of liability clause, so that the cap applies to everything except the claims most likely to be large. The review checks whether the indemnity is inside or outside the cap, asks for a separate cap where the risk is insurable and for the general cap to apply where it is not, and checks the indemnity's interaction with the exclusions: an exclusion of consequential loss that applies to damages claims but not to the indemnity leaves the indemnifier paying the losses it thought it had excluded. Where an indemnity is imposed on a consumer, section 4 of the Unfair Contract Terms Act 1977 subjects it to the reasonableness test.

Insurance, and whether the indemnifier can pay

An indemnity is worth what the indemnifier can pay, and the review checks the indemnifier's insurance against the risks indemnified: public and product liability for injury and damage, professional indemnity for advice and design, cyber cover for data, intellectual property cover where available. It asks the party receiving the indemnity to require the insurance to be maintained and evidenced, and warns the party giving it that an indemnity for losses its policy does not cover is a personal promise.

Drafting for the side you are on

For the indemnifier, the review drafts defined triggers, losses limited to those reasonably incurred and caused by the trigger, a conduct of claims procedure, exclusions where the loss is caused by the indemnified party's own act or by materials it supplied, a cap, and a duty to mitigate. For the indemnified party, it drafts triggers that match the risk, losses that include costs and the indemnified party's own management time, a procedure that lets it settle claims that threaten its business, and a cap high enough to matter. Interest on an indemnity payment that is a commercial debt runs under the Late Payment of Commercial Debts (Interest) Act 1998.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The customer wants us to indemnify it for any losses arising from our services. What does that add to a normal claim?

A great deal: no need to prove breach or that the loss was foreseeable, no duty to mitigate unless the wording brings one in, and often no cap. The review narrows the trigger to specific risks, limits the losses to those caused and reasonably incurred, and brings the indemnity within a cap.

We have an indemnity from our supplier for IP infringement. Is it worth anything?

That depends on the trigger, the losses covered, the procedure and the supplier's insurance. The review checks that the indemnity covers claims against you and your customers, includes costs and settlements, gives the supplier conduct of the claim so that it pays, and is backed by cover.

Can an indemnity be capped?

It can, and customers resist it because they put indemnities outside the cap to protect the claims most likely to be large. The review asks for a separate cap set by reference to your insurance where the risk is insurable, and for the general cap to apply where it is not.

Related guidance and services

• Contract review, £495, the service this page describes
• Terms and conditions drafting, £995
• Reviewing a limitation of liability clause
• Reviewing a contract with unlimited liability

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.