Be Clear About Whether Indemnification Covers Only Nonparty Claims

You like fights over indemnification language? OK, here’s a reliable source of disputes: whether an indemnification provision covers just nonparty claims or whether it also covers claims between the parties.

I wrote about that in this 2011 post, but given the perils of copying and pasting dysfunctional contract language, you can expect that sort of dispute to crop up in litigation sporadically. Well, Keith Paul Bishop writes about just such a dispute in this post on his California Corporate & Securities Law blog.

As usual, I don’t care much about what the court decided and why. Instead, such disputes offer a there-but-for-the-grace-of-god moment. Contract parties get into such fights only if the drafters screw up.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

4 thoughts on “Be Clear About Whether Indemnification Covers Only Nonparty Claims”

  1. You may be undervaluing court decisions as a source of good language for drafters.

    For example, if a court says, ‘The issue in this case is whether the indemnity provision applies to only third party claims or also to first party claims’, an alert drafter may avoid such a dispute by borrowing from the court and saying something like ‘this indemnity provision applies to both first party and third party claims’.

    This isn’t an appeal to ‘tested’ language in the sense of using disputed language that the court held to mean A, but rather using A itself as a better alternative to the disputed language. The former deserves your bad opinion, but I see no objection to critical use of the latter.

    • My task is to figure out how to say clearly and concisely whatever you want to say in a contract. Nothing suggests that judges as a class are particularly skilled in that department. In particular, nothing suggests that I should defer to them. So I’ll keep an eye out for judge foibles that might affect how they interpret contracts, and if a judge comes up with something nifty I’ll happily copy it, but otherwise, what judges have to say about how to express stuff is of no particular interest.

  2. Undue deference to the linguistic ability of judges – not good.
    Recognition that judges’ jobs involve publicly opining on the meaning of contractual provisions, and that they are reasonably intelligent beings whose views should not be ignored – good.

    • No compreno. Are you being sarcastic in your first point and sincere in your second point?

      In any event, I’m not suggesting that one ignore what judges have to say. Instead, it’s simply that judges as a class aren’t more qualified than others when it comes to determining what is clear and concise. In fact, they’re probably less qualified, in that determining the meaning of confusing contract language is very different from the task of coming up with clear contract language. See the following post for what Chancellor Strine had to say about that:


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