Indemnification Clause

What This Clause Does

Indemnification means one party agrees to cover the other party's legal costs, damages, and settlements if a third party makes a claim related to the contract. In SaaS agreements, you'll typically indemnify the vendor if someone sues them because of how you used their software. The vendor typically indemnifies you if their software infringes someone else's intellectual property.

The scope of what you're indemnifying matters enormously. Indemnifying for your own misuse of the product is reasonable. Indemnifying for any claim arising out of your use — including claims that aren't your fault — is not.

What This Looks Like in a Contract

"Customer shall indemnify, defend, and hold harmless Vendor and its officers, directors, and employees from any third-party claims arising from (a) Customer's use of the Service in violation of this Agreement, (b) Customer's breach of any representation or warranty, or (c) Customer Data."

Red Flags to Watch For

• You indemnify the vendor for any claim related to your data, regardless of fault
• Your indemnification obligation is broader than the vendor's
• Vendor's IP indemnification excludes modifications you made at their direction
• No mutual indemnification — all obligations run in one direction

Negotiation Strategies