Indemnity Contracts Save Litigation Expenses

Operating a successful business requires more than simply ensuring that revenues exceed expenses; it also means protecting your business against exposure to liability caused by the acts of other people. In today’s business environment, partnering with other companies to help bring your goods from the manufacturing plant to the marketplace is essential. And almost all aspects of such business relationships are governed by formal, written contracts that allocate risks among the collaborating companies.

But do you really know what’s in those contracts? Or, perhaps more importantly, do you know what’s not in them? If your goods are damaged, or if someone is hurt, in bringing those goods to market, will your business be required to provide compensation for losses suffered by the injured person? In short, do your contracts contain appropriate indemnification provisions to protect your business, or does your contract leave you on the hook for a mistake made by somebody else?

The answers to these questions are critical to any business whose everyday contracts require it to provide indemnification to a third party in the event of loss or injury. Your company needs to ensure that it will not be required to indemnify or reimburse the companies with whom you do business for those companies’ own acts of negligence. In the next few months, you will find in World Trade 100 an article that provides an overview of how indemnification provisions operate when the company seeking indemnification is wholly or partially responsible for the loss it has suffered. The article will also examine how the courts in a number of states interpret the applicable law, demonstrating that the wrong wording in an indemnification provision could require your business to shoulder a risk that you never meant to assume. Finally, the article will offer suggestions to fix any shortcomings in indemnification provisions. 

Jeffrey L. Lewis is a partner in the Atlanta based law firm Arnall Golden Gregory and a member of the firm’s Logistics & Transportation Team.

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