In a legal context, "indemnifying" means one party (the indemnitor) is obligated to compensate another party (the indemnitee) for losses or damages, typically arising from a third-party claim. It's a contractual agreement where one party shifts the financial responsibility for certain risks to another.
Obligation:
Indemnifying creates a legal obligation on one party to compensate another.
Compensation:
The compensation can cover various losses, damages, or liabilities, depending on the specific agreement.
Shifting Risk:
Indemnity clauses are used in contracts to shift and manage risk between parties.
Common in Contracts:
You'll find indemnity clauses in various contracts, including purchase agreements, commercial agreements, and insurance policies.
Examples:
A seller might indemnify a buyer against certain liabilities arising from the sale.
An insurance company indemnifies its insured against covered losses, according to Investopedia.
Levels of Indemnification:
There are different levels of indemnification, such as broad form, intermediate form, and limited form, each with varying scope of responsibility for the indemnifying party.
Distinction from Guarantees:
While both indemnify and guarantee involve financial obligations, indemnities are typically primary obligations, while guarantees are secondary, arising only if a third party fails to perform.