Sept/Oct 19 - ChannelVision Magazine

Finally, the extent or limitations of the Indemnification clause are provided by phrases such as “to the extent caused by” or “to the fullest extent permitted by law.” Be mindful to identify the vast difference be- tween the breadth of responsibility between the various phrases. In addition, the Indem- nification clause may limit the time in which to bring an action based on Indemnification, or there may be a cap on the amount of damages available under the Indemnifica- tion provision. There is a cost implied with each word in an Indemnification clause. As indicated above, the specific words used in an Indem- nification provision and the extent of the In- demnifying obligations increases (or decreases) the amount of risk assumed by a party. Thus, if a party provides services or goods to another party pursuant to an agreement that has no Indemnification clause, additional costs are lim- ited. But, if the same party provides the same services or goods to another party pursuant to an agreement that does have Indemnification obligations, then the Indemnifying party may incur additional future costs. As a result, the two scenarios carry different costs to provide the same services or goods. In another example, a party may consider an agreement that is structured in a manner in which it appears that “they have nothing to lose,” such as in a relationship whereby if condition X occurs, then the party gets paid, but if condition X does not occur, the party does not get paid. If an Indemnification clause does exist in this agreement, then the party may have something to lose. Here, the party must consider the probability of the Indemnifi- cation clause enforced and the possible scope of monetary damages that may occur. Once again, there is a financial component to this Indemnification clause. Ultimately, Indemnification is a financial con- sideration. You cannot spell “Indemnification” without “finance,” and you should review each word in an Indemnification clause with consider- ation on the financial impact of the transaction. Philip Josephson is the found- er of Sterling Business Law where he and the firm deliver corporate legal and business advisory ser- vice to clients across the United States. Philip holds a Finance de- gree and a J.D. from the Univer- sity of Miami, an M.B.A. from Columbia University; he is a Registered Investment Advisor (RIA); he is a member of the Florida Bar, the Arizona Bar, and the Federal Communications Bar; and he is a Certified Valuation Analyst (CVA) as certified by the National Association of Certified Valuation Analysts. He can be contacted at pjosephson@ sterlingbusinesslaw.com. Nothing written above is intended to be legal advice. channel management Here are three examples of Indemnification clauses that may look similar to the casual reader, but are significantly different: Sample: Broad Indemnification Sample: Intermediate Indemnification Sample: Limited Indemnification “To the fullest extent of the law, the Indemnifying party shall indemnify, defend, and hold harmless the Indemnified party, its officers, employees, agents, representatives, consultants, and contractors from and against any and all loss, costs, penalties, fines, damages, claims, expenses (including attorney’s fees) or liabilities … arising out of, resulting from, or in connection with the representations, warranties, covenants, or services contemplated by this Agreement.” “The Indemnifying party agrees to hold harmless and indemnify the Indemnified party from any and all liability that arises out of the Indemnifying party’s negligence, whether it be sole or in concert with others, in connection with the Indemnifying party’s representations, warranties, covenants, or performance of services contemplated by this Agreement.” “The Indemnifying party agrees to indemnify the Indemnified party from and against liability caused by the Indemnifying party’s negligent performance of services contemplated by this Agreement.” 32 Channel Vision | September - October, 2019