Indemnity refers to a legal obligation to compensate another party for loss or damage that has occurred or may occur in the future. This concept is commonly found in contracts where one party agrees to protect the other from specific risks.
Legal Context
In contracts, indemnity clauses are often used to allocate risk between the parties. One party agrees to indemnify the other, meaning they will cover the costs or damages if certain events occur, such as lawsuits, accidents, or breaches of contract. Indemnity is a way to manage potential liabilities and ensure that one party is not left financially exposed.
Example
in a construction contract, a contractor might agree to indemnify the property owner against any claims arising from workplace accidents. If an employee is injured on-site and sues the property owner, the contractor would be responsible for covering the legal costs and any settlements or judgments, protecting the owner from financial loss.
