Indemnity | Practical Law

Indemnity | Practical Law

Indemnity

Indemnity

Practical Law Glossary Item 2-382-3536 (Approx. 3 pages)

Glossary

Indemnity

Also known as indemnify and indemnification. Generally, an undertaking by one party to reimburse the other party or pay them directly for certain costs and expenses.
In an acquisition context, a purchase agreement generally provides that a party will indemnify the other party against losses resulting from breaches of representations and warranties, covenants, and agreements by the indemnifying party. In many cases, a party may also seek indemnification from the other party for specific liabilities (for example, losses arising from a particular litigation of the target company). For examples of indemnification provisions in purchase agreements, see Standard Documents, Stock Purchase Agreement (Pro-Buyer Long Form): Article VIII and Asset Purchase Agreement (Pro-Buyer Long Form): Article VIII. For more information on indemnification provisions in purchase agreements, see Practice Note, What's Market: Indemnification Provisions in Acquisition Agreements.
In a financing context, a bank commitment letter and loan agreement often provide that the borrower will indemnify the agent banks and lenders for losses, liabilities, and related expenses they incur from litigation or other claims related to the loan or the borrower (such as environmental liabilities). For more information on indemnification provisions in loan agreements, see Practice Note, Loan Agreement: Expenses and Indemnification and Standard Clause, Loan Agreement: Expenses and Indemnification.