How to Write a Reverse Indemnity Clause for a Subcontractor
An indemnity clause is a portion of a business contract that offsets or transfers loss or liability from one party to another. In the event damage or losses occur in the course of the business relationship, a well written indemnity clause will protect a business by ensuring its assets are free from encumbrance in the event damage occurs during the course of the business activity. Writing an indemnity clause into an existing contract includes defining the potential harms and stating how the contractor will not hold those harms against the sub-contractor.
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Instructions
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Define the list of harms that could occur during the course of the business activity. For example, a subcontractor may not be able to complete work within a deadline because of supply shortages for a material. In this case the harm to the general contractor would be work not completed on time. Because the supply shortage is out of the subcontractor's control, he will not be held liable for this.
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Put into statement form how each harm will be indemnified. For example, "The contractor agrees to hold harmless and indemnifies the sub-contractor for losses for work not completed due to a shortage of materials."
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Review the reverse indemnity clause with all concerned parties, i.e., anyone who agrees to abide by the terms and conditions of the indemnity clause. If any clarifications must be made, do so before the contract is signed.
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Review all local and state laws that pertain to indemnity clauses to ensure the clause is lawful.
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Get signatures from all parties that will be required to abide by the terms and conditions of the clause.
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Tips & Warnings
An indemnity clause is a legally binding agreement. It is always good practice to consult an attorney before signing a document that could affect your rights.
References
- Anatomy of an Indemnification Provision: Inedtifying and Addressing Basic Indemnification Issues; By John Hutchins, Kenyon and Kenyon, L.L.P. (PDF)
- Lhfconstructlaw.com: Indemnity Clauses; What Are They and What Risks Do I Assume When I Have One In My Contract? By William C. Last, Jr. and Fredrick J. Northrop; Attorneys at Law
