- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 19 Jul 2018
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. (See 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.
 Find out more
 Related articles on Designing Buildings Wiki
Featured articles and news
A new guide to fire safety and security in the selection of doorsets.
Review of the long-awaited discourse on these beautifully produced, colourful wallpapers.
From alabaster to travertine – how many types do you know?
Well-designed lighting helps maintain a healthy physiological and psychological balance.
Transferring the risk for obtaining the target BREEAM rating.
A simple but effective way to determine the root cause of an issue.
BSRIA report suggest the European market will double to 415 million Euros by 2023.
Why a wellbeing strategy is vital for property managers.
An ECA briefing for members about the commercial implications of leaving the EU.
A crucial moment on any project - and fraught with danger.
The performance gap from a Northern Ireland perspective.