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What is an Indemnity Agreement?
An Indemnity Agreement is a contract between two parties that protects one party from liabilities, losses, claims, and damages during their involvement in an activity.
In an Indemnity Agreement there are two parties: the indemnitee and the indemnifier. The indemnitee is the party protected by the agreement. The indemnifier is the party providing the protection.
For example, a skydiving company is likely to require a customer to sign an Indemnity Agreement to protect it from liability if there’s an accident during a jump. In this scenario, the skydiving company is the indemnitee, and the customer is the indemnifier.
An Indemnity Agreement is also known as the following:
- Hold harmless agreement
- No-fault agreement
- Indemnification agreement
- Assignment of indemnity
What is indemnity?
Indemnity refers to protection from a loss or exemption from liability for damages. Indemnity is a contractual agreement, in which one party agrees to cover any potential damage or loss caused by the other party.
Should I sign an Indemnity Agreement?
Signing an Indemnity Agreement is an important decision that shouldn’t be taken lightly.
Indemnitee
As the indemnitee, it may be a good idea to sign an agreement if your company provides a service where there is a risk of injury or damage to a property.
An Indemnity Agreement can be helpful in your personal life as well. For example, if your friend gets into an accident while driving your vehicle, you may be liable for any damages. However, the liability shifts to your friend if they sign an Indemnity Agreement before borrowing the vehicle.
Indemnifier
As the indemnifier, it’s a good idea to be cautious when signing an agreement. Carefully read the document, or have a lawyer review it to understand the risks and responsibilities you’re agreeing to cover.
When do I use an Indemnity Agreement?
Many circumstances can benefit from an Indemnity Agreement. Some common uses include:
- Providing services: Use an Indemnity Agreement to remove any liability when providing a service that may cause injury or damages.
- Hosting events: Use an Indemnity Agreement when hosting or facilitating an event, such as a concert or charity fundraiser, in case of a potential loss or accident.
- Purchasing real estate: Use an Indemnity Agreement in your Contract for Sale of Real Estate to relieve any liability for future problems with the property, including problems caused by the seller.
- Renting property: Use an Indemnity Agreement when you allow a tenant to move in before the lease date to hold the tenant to all the lease provisions, even though they’re moving in early.
- Hiring workers: Use an Indemnity Agreement to absolve responsibility for any injuries or accidents caused by employees or contractors in the workplace.
- Working as a consultant: Use an Indemnity Agreement to relieve yourself of any liability that might come from your work.
How do I create an Indemnity Agreement in Australia?
You can create an Indemnity Agreement by completing LawDepot’s questionnaire. Using our template ensures you complete the following necessary steps:
1. State who the agreement is protecting
State if the Indemnity Agreement will protect your party or the other party.
2. State your location
Countries within Australia may have differing indemnity laws. Select your state or territory, and we’ll tailor your Indemnity Agreement to meet the laws and regulations of your location.
You can use LawDepot’s Indemnity Agreement template in:
- Australian Capital Territory
- New South Wales
- Northern Territory
- Queensland
- South Australia
- Tasmania
- Western Australia
3. Outline the terms you wish to include
You may include any of the following terms in your Indemnity Agreement:
- Indemnity insurance: The indemnifier should obtain liability insurance on behalf of themselves if they don’t have the resources to cover all the foreseeable liabilities under the agreement. You should weigh the cost of insurance against the protection it provides to determine if insurance coverage is reasonable for your contract.
- Indemnification against criminal proceedings: Provide basic protection against civil lawsuits or criminal proceedings. Indemnification for a criminal proceeding is only available if the indemnitee has no reason to believe their conduct was unlawful.
- Confidentiality clause: Ensure outside parties can’t access confidential or proprietary information within the agreement.
- Monetary limit: Specify the maximum monetary amount of indeminfication (protection) for each claim or action. Otherwise, the amount of indemnitcation could be unlimited.
4. Describe the subject of the indemnity
Choose the category that best describes the subject of your Indemnity Agreement:
- Service: Provides indemnity relating to the provision of services in a contract. For example, a construction company may seek indemnity for its workers from any damage they unintentionally cause to a property while providing a service.
- Activity: Provides indemnity for a range of activities like hosting events, borrowing dangerous equipment, or providing thrill-seeking entertainment (e.g., bungee jumping). Use this category if you're unsure which one is the best fit for you.
- Transaction: Protects the seller against liability for any issues the buyer may face concerning the goods after the transaction is complete. This category also applies to landlords and tenants in a lease agreement.
Include the indemnitee’s name, address, and whether they are an individual or company in the agreement.
The agreement can cover multiple indemnitees if they’re intimately related, such as spouses or business partners. However, if the indemnitees are working individually, they will each need an Indemnity Agreement.
Include the indemnifier’s name, address, and whether they are an individual or company in the agreement.
If there are multiple indemnifiers, they will be jointly and individually liable for any claim or damages. This means each indemnifier is responsible for the entire claim or damages.
7. Outline any additional clauses
Include any additional terms or conditions that your Indemnity Agreement doesn't already cover.
8. Provide the signing details
State the agreement’s execution date. The execution date is the day the parties sign the agreement.
It isn't legally necessary to have witnesses sign the document, but it may be a good idea to do so if you need to submit your Indemnity Agreement to a bank or other institution.
