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Why you need to take care with indemnity clauses

Well-written contracts are essential for your business to succeed. They can protect you when things go wrong. Yet, any party you sign a contract with will want the agreement to protect their interests. Thus you have two sides, both hoping the arrangement will work in their favor. That will not always be possible.

One area you need to take great care of is indemnity clauses. If you wish to include them, you need to make sure they will stand up in a court of law. If the other party is trying to put them in, you need to make sure you are not signing your rights away.

An indemnity clause usually favors one side

To understand why indemnity clauses can be tricky, let us look at an example:

You book a day’s rafting for your staff as a thank you for the last year. The outfitter wants each person to sign a waiver, saying that you will not hold them responsible in the event of an accident.

You accept that any adventure activity carries risk. Yet, you might not be happy to let the outfitter off if you consider an accident their fault. If your staff drown, it will harm your company. Their families might take action against you as the trip organizer if they cannot claim against the rafting outfitter.

 Now look at it from the other side. If you are the rafting company owner, you know the river can be unpredictable and so can clients be. You know one lawsuit could destroy your business. It is clear why you want customers to sign a waiver that includes this indemnity clause.

It is crucial to have an attorney check any business contract you create or sign that includes indemnity clauses. Understanding the potential effects of anything you sign is vital to make informed decisions. If you do not, you could expose your company to unnecessary risk.