#indemnification #corporatelaw #businesslaw

Indemnification clauses are common in commercial contracts. But, what are they?

Put simply, an indemnification clause is a promise by one party to pay for the losses of another if the offending party causes the other harm.

So, let's say I'm selling your product and I want you, as the vendor, to indemnify me if a customer names me in a lawsuit (barring my own gross negligence or misrepresentation of the product to the customer). In this context, an indemnification clause makes it clear that you will be held accountable and take the responsibility should a third party sue me.

Indemnity brings in another concept called defense. Which means that not only are you held liable for damages in a potential lawsuit, but you also have to pay for the lawyer to defend me in said lawsuit and you would hold me harmless meaning you won't come after me for this issue.

Indemnification clauses are a more fulsome, clearer representation of a shifting of risk than relying on negligence or general breach of contract.

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Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.

Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.

Brett also maintains mergerresources.com, a site packed with free articles, videos, checklists, deal diagrams, template contracts, and other tools to help pass M&A knowledge to others.

Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.

From 20102013, Brett served as Chief Legal Counsel of a publiclytraded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.

Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.

Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.