Indemnification clauses allow a contractual partner: The answer may lie in the contract, especially if there is an opt-out clause. What these clauses are and when they are included in contracts is explained below. Under this type of clause, the general contractor (beneficiary of the compensation) is compensated for his own acts of “passive negligence”. Passive negligence exists in cases of simple non-performance; and active negligence exists when the party participates in the affirmative act of negligence. The essence of the determination is whether the party is directly involved in the Negligence Act, which resulted in the liability for which compensation is sought. Therefore, if the general contractor was involved in the act of negligence, he could not claim compensation. [4] Casanova v. Marathon Corp., 256 F.R.D. 11, 14 (D.D.C. 2009) (“[A] claim for damages arises only when the party claiming compensation is held liable and makes a payment.”); Russell vs. Lemons, 205 S.W.2d 629 (Tex. Ct.
Civ. App. 1947) (“The plaintiff`s plea was therefore born only if he suffered prejudice as a result of the dismissal of the judgment or part thereof.”) A Type I clause is a clause that expressly and unequivocally provides that the subcontractor (beneficiary of the compensation) compensates the general contractor (person entitled to compensation) for the negligence of the general contractor (person entitled to compensation). With such a clause, the general contractor is exempt whether the liability is solely due to his negligence or contributory negligence towards third parties or not. Under an intermediate indemnification clause, the Contractor agrees to indemnify the Owner for all losses, in whole or in part, with the exception of the Owner`s “exclusive negligence”. Even if the owner is 99% to blame but is not responsible for the entire loss, the indemnification provision is triggered and the contractor is responsible for the entire loss. On the other hand, if the owner is 100% responsible for the loss, the person entitled to compensation is exempt from any obligation to compensate. The intermediate form of compensation is more akin to a co-inflicted error analysis (as opposed to a comparative analysis): even the slightest negligence of the contractor can make him liable for the entire damage. The whole purpose of a indemnification clause is to protect one part of the responsibilities of the other. Although set-off clauses are used by and between trading partners, there are still restrictions on the degree of liability that one should assume for another. The set-off clauses set these limits.
Procedure. A party seeking compensation (the “Indemnified Party”) shall promptly notify the other party (the “Indemnifying Party”) in writing of any claim for compensation, provided that failure to provide such notice does not relieve the Indemnifying Party of any liability under this Agreement (unless the Compensating Party has suffered actual pecuniary damage as a result of such breach). The indemnified party offers the indemnifying party the sole defense and control of such claim. The indemnified party, if requested, will provide reasonable assistance to the indemnifying party in defending a claim. The indemnifying party reimburses the indemnification clauses contained in almost all trade agreements. They are an essential tool for the allocation of risk between the parties and, as such, one of the most common and negotiated provisions of a contract. The Subcontractor undertakes to release the General Contractor freely and without compensation from any loss or liability of any kind arising out of or in any manner whatsoever in connection with the performance of this Contract by the Subcontractor, including loss or liability caused by the active negligence of the General Contractor, with the exception of losses or liabilities arising solely from the intentional or active negligence of the general contractor. Most indemnification provisions require the indemnifying party to “indemnify and hold harmless” the indemnified party for certain liabilities.
In practice, these terms are usually matched and interpreted as a unit to mean “remuneration”. The ProNet website offers numerous articles and training materials dealing with professional liability and design risk management, including indemnification clauses and limitation of liability clauses. Three articles by Kent Holland dealing with set-off clauses are available on a/e ProNet. .