INDEMNITY CLAUSE IN LAND DEALS – WHY IT MATTERS
The word “indemnity” is used in contracts by lawyers. It means that someone gets paid back for a loss or debt they have. It has been described as an agreement between two people, the indemnitor and the indemnitee, that the indemnitor will pay the indemnitee for a loss that the indemnitee has suffered. You can have a claim to an indemnity because of the law or because of a contract.
It’s also important to remember that an indemnity can be tied to the rules of damages. The main responsibility for the amount of the indemnity falls on the person who is paying it. This means that the indemnity will still be valid even if the original transaction is cancelled for any reason. Over time, there have been different ideas about what a contractual indemnity is. Among these claims are:
That a “loss” may be covered by a “loss” indemnity if it is caused by a loss of money or a loss or damage to physical property. In some contracts, the word “indemnity” can mean a loss that came about because a third party made a claim against the person who got the indemnity.
By its very nature, liability under an indemnity only exists for a known amount, but an action can be brought under an indemnity before the liability is known. As a result, the obligation to compensate may arise before the beneficiary has lost anything or been hurt.
Indemnities are contracts, so unless they are in the form of a deed, they must be backed by something of value. As a way to negotiate compensation, an indemnity clause has a number of benefits, such as:
- Indemnification is the way to measure compensation, and it may be more than damages for breaking a contract.
- It may be harder to prove damages than “out-of-pocket” losses and costs for indemnification.
- Most likely, mitigation of loss does not apply to indemnities. It shouldn’t matter how far away the damage is, risk can be moved with indemnities.
In real estate transactions, the purchaser takes on the most risk. This is because when a property is sold, ownership, along with any unknown risks and liabilities, moves from the vendor to the purchaser. A lot of properties in the big cities are in court cases that have been going on for decades because of things like:
- The person who got the property did so by force, influence, or coercion; or
- The vendors’ legal heirs say they have a right to the property.
In this case, the indemnity clause in the sale agreement protects the purchaser from any legal problems or flaws in the property or the title that will be transferred and pays him for any losses he has to deal with.
CONCLUSION
The indemnity clause is put into the sale agreement by the purchaser as a precaution against the vendor to protect his interests in case a third party or the government ever makes a claim against the property. It also takes care of unknown liabilities and makes the agreement stronger because you know how much you can be held responsible for.
There are often indemnity clauses in contracts and purchase receipts, but they are often buried deep in the small print. It is also rarely talked about or negotiated by the parties to a contract, unless their lawyers are there to look over the contract for them. If the indemnity clause isn’t in the contract, it leaves the business open to both known and unknown risks.
