Indemnity clauses in design and construction contracts
To help develop this article, click ‘Edit this article’ above.
An indemnity clause in a contract allocates risk for claims or for loss or damage between the parties to the contract, so that if one party suffers a loss, the other party will reimburse them. Indemnities are primary obligations that remain even if the contract is set aside.
Indemnity clauses are commonly used on construction projects to allocate risk between; the client and contractor, the client and consultants or the contractor and sub-contractors. In complex contracting situations indemnity clauses may run throughout the contractual chain.
Construction contracts may for example include a clause requiring the contractor to indemnify the client against expense, liability, loss or claim in respect of personal injury or death of any person arising out of the works. Or they may require the contractor to indemnify the client against breaches of contract such as non-payment of statutory fees. In addition, designers appointment agreements may include an indemnity in respect of claims for breach of professional duty. Typically designers are required to hold professional indemnity insurance to cover such a liability and this requirement is now increasingly asked of contractors with design responsibilities. (NB See also Legal indemnities for a list of other situations where insurance can indemnify against losses).
The precise consequences of an indemnity clause will depend on its wording and how it is read in relation to the rest of the contract. One particular area where differences can be significant is whether a clause requires an indemnity only against losses caused by the party providing the indemnity, whether they exclude negligence on the part of the indemnitee, or whether they cover all losses no matter how they were caused. For example, a professional indemnity insurance policy is not dependent on allocating blame to the indemnifier.
Because of these differences, and in order to accurately define the extent of losses covered, indemnity clauses require very precise drafting, and due to complex case law they are becoming increasingly detailed. It is important therefore that the parties to a contract read indemnity clauses carefully and fully understand the obligation they are agreeing to.
 Related articles on Designing Buildings Wiki
Featured articles and news
The origins, evolution and future of Level 3 BIM.
For new and returning Urban Design students, check out our article list divided up into the modules you'll be studying.
Report states that health of urban dwellers could be significantly improved by rethinking transport design.
The Kremlin, the centre of Russian power, includes some of the country's finest architecture.
Report launched outlining steps for a national infrastructure system that is efficient, sustainable, and delivers until 2050.
A review of Justin Bere's concise and well-presented introductory guide to Passive House.
This article describes in detail the tender process for a typical commercial construction contract.
What is energy storage, what are the different types and what is its future?
MAD Architects reveal their designs for a state-of-the-art concert hall in Beijing.
Take a look at BIG's designs for two twisting towers in New York City.
'The filing cabinet' which was labelled one of the best British buildings of the 21st century.