I’m not a fan of kitchen-sink definitions—definitions that include a grab-bag of items, not all of which belong together.
Consider the following definition of “Claim,” culled from the grand flea market that is EDGAR:
“Claim” means all losses, claims, damages, penalties, judgments, liabilities and expenses of any kind (including, without limitation, reasonable and documented out-of-pocket costs of investigation and defense thereof and reasonable and documented external counsel’s fees and disbursements associated therewith and any applicable value added tax).
I don’t understand how in that definition “claims” can be included with “losses.” Acme buys a widget from WidgetCo, the widget blows up, and Acme’s plant burns down. So Acme brings a claim against WidgetCo, seeking to recover its losses. The claim is a proceeding; the losses are that which Acme is seeking to recover. So throwing them both into a definition can’t work—they’re not equivalent.
In the example from EDGAR, the simplest fix would be to omit “claims” from the definition and use “Losses” as the defined term.
Mind you, that definition needs lots of additional help.
13 thoughts on “Kitchen-Sink Definitions”
If you’re going to indemnify, defend and hold me harmless with respect to “Claims”, I’d want the definition of “Claims” to be as broad as possible. I don’t want to have to parse through those elements that are subject to indemnification, those that are subject to defense, and those that are subject to hold harmless.
I’m OK with broad; I’m not OK with lumping together apples and oranges.
And of course, I’m not going to accept your premise that “indemnify, defend, and hold harmless” is appropriate language.
As long as different courts treat “indemnify”, “defend” and “hold harmless” as separate concepts (and some do), then I have to make sure that the other party protects me on all three fronts. And the things I want them to protect me from are the stuff that falls into “Claims”.
So, if I license software from Ann and I get a letter from Betty claiming that my use of Ann’s software infringes Betty’s rights, I want to turn the whole thing over to Ann at Ann’s expense. If there are costs to determine whether Ann’s software infringes Betty’s IP rights, I want those to be covered by Ann. And if Betty’s letter matures into a proceeding, I want Ann to defend and pay the costs of that too. And I want Ann to be responsible for costs of any final settlement or judgment. And if I incur any costs in providing assistance to Ann (whether or not in a proceeding), I want her to pay that too.
If I use my language, I’m comfortable that all of this is Ann’s problem – not mine. And that is really the goal of the indemnification provision. So whether it’s apples and oranges or just different kinds of apples, I want Ann to pay for them – not me.
I still reject your premise (although that sounds unduly harsh): a core principle of my approach is that I don’t want to put myself at the mercy of the courts. Regarding indemnify and hold harmless, see the following post: https://www.adamsdrafting.com/revisiting-indemnify/.
If there is an indemnification dispute, then you very likely will be in court. And you will be at the mercy of that court as it interprets your indemnification provision. And if, for example, you are in a court like the California Court of Appeals, and it takes the position that “indemnify” and “hold harmless” are separate concepts, then you have a problem if you are indemnified but not held harmless.
I might want all courts to agree that “indemnify” is an exact synonym of “hold harmless”. But I need my contracts to reflect the fact that courts don’t agree.
You’re still missing my point.
If I am before the California Court of Appeals arguing the scope of an indemnification clause that says “indemnify” but not “hold harmless”, I don’t want to have to explain to the court how one is a synonym of the other, rendering use of both terms redundant – especially where that court has said “indemnify” and “hold harmless” are different things.
I get your point. But the MSCD’s take on what indemnification *should* be is irrelevant in a system where a court says that “indemnify” and “hold harmless” are different concepts. I have to draft for what a court has held – not what the MSCD might recommend.
I apologize for my unduly terse previous response. In his comment, A. Wright Burke has ably summarized my position. In an indemnification provision, the drafter has the opportunity to state explicitly what is covered. If you do that properly, what verb you use pales into relative insignificance. As I’ve written elsewhere, you could even just say “Acme will be liable to WidgetCo for” instead of “Acme shall indemnify WidgetCo against.” That’s why for most contexts I’ve long been a peace with a simpler fix, namely just using “indemnify.” If I’ve missed anything, let me know.
I think Ken is saying that the way to draft when courts might distinguish “indemnify” and “hold harmless” is to use the former only, but specify the kind and level of protection you want, including the extra “hold harmless” benefit if desired, so in litigation the court is dealing with defined language in a particular contract and not with abstract concepts in a vacuum.
Thank you for providing response more gracious than mine.
Ken, do you have a good definition of “Claim” that you’re happy with? I often use the defined term when identifying what the parties are waiving and what they are providing indemnity for. Thanks.
At some point I’ll post my indemnification language. But meanwhile, I’ll just note, simplifying a bit, that I use as my core defined terms “Proceeding” and “Loss,” so I don’t use “Claim.”
I’ll regret not looking up “indemnify and hold harmless,” but from memory and pending Ken’s posting of his indemnification language, I would clean up the EDGAR passage as follows:
[Assumed context is something like: Widgetco shall indemnify Acme from loss arising from party and nonparty contract claims, tort claims, equity claims, and all other claims under this agreement or relating to the subject matter of this agreement.]
“Claim” means a demand against Acme [its officers, directors, employees….] for compensation or other relief.
“Loss” means one or more of the following [in alphabetical order]: costs of defense, costs of investigation, other costs, counsel fees, damages, disbursements, expenses, judgments, liabilities, penalties, taxes, and all other losses Acme incurs. [Deliberate use of defined term within definition.]
[Also assumed: a provision for handling indemnification claims.]