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Know Your Clause

Indemnity Clause

 

Q.1.What is the Indemnity Clause?

A.1. Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability for damages.

The concept of indemnity is based on a contractual agreement made between two parties, in which one party agrees to pay for potential losses or damages caused by the other party.

 

Q.2. Why have an Indemnity Clause?

A.2. In a lease, a landlord permits an unrelated party, the tenant, to do business in and have control over space owned by the landlord.  In law there is an assumption that a property owner should have at least some responsibility for keeping property that he owns safe. On the one hand, because the landlord is the owner of the space, if the tenant or its property is damaged, or if a customer is injured in the space, the landlord is likely to be sued for the damage or injury. On the other hand, frequently, landlords have little practical control over a parcel of property or interior store space after it is leased to a tenant. They also do not wish to bear the cost of insuring for accidents in the leased space. As a consequence, most landlords include waiver and indemnification provisions in an attempt to shift to the tenant all responsibility for losses and accidents in the leased space. The clause seeks to insulate the landlord from responsibility for occurrences outside the space if the tenant or its customers are involved.

 

Q.3. What is required to prevent a breach of this clause? What happens is the clause is breached?

A.3.These two questions can be answered together. Generally this clause is enforceable by the Landlord, therefore if there is a breach, in that the Landlord is sued for an accident/incident that takes place whilst the Tenant is in occupation of the premises, the Landlord will plead the indemnity clause and it will be construed strictly in its favour.

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