It is quite common to see the phrase ”costs (including reasonable legal fees)” in the list of losses that can be recovered in a indemnification clause. Following the recent case of Euro-Asian Oil v. Credit Suisse, it appears that the term ”reasonable legal costs” in the context of a resulting dispute will have a specific meaning. In this article (admittedly longer than usual), we look at what set-off clauses are, what they are supposed to achieve, how they can be abused, and how they should be treated. There is no rule on when compensation should be awarded, it is largely due to the negotiating powers of the parties, when it should be included and when it should be excluded. However, if the Supplier is in a position where the Customer obliges it to comply with internal requirements (such as compensation for data protection, confidentiality, violation of the intellectual property rights of third parties), the Supplier must be aware of how to minimize the impact of the compensation in order to effectively bring the parties to an appropriate and fair conclusion. In some cases, the risk of loss caused by a breach of contract may exceed the contract price and the compensating party cannot afford unlimited compensation. For this reason, parties often negotiate to limit the indemnifying party`s liability by limiting it to a certain amount or limiting it to certain circumstances. This article also examines the clear implications of indemnification for IT contracts and the limitation of liability as it is usually written. But because of the confusion surrounding compensation, it`s hard to predict what a particular court will do with a limit on compensation liability.
However, if you are the beneficiary of compensation, why risk it? Use the limit proposed above for indemnification obligations in red. It is quite common to see a long list of indemnified parties in a contractual compensation. You may be familiar with phrases such as ”Supplier shall indemnify and hold harmless Customer, its affiliates, Service Recipients and their respective subcontractors, employees and suppliers at any time during and after the expiration of the term of this Agreement. Indemnification acts as a transfer of risk between the parties and alters what they would otherwise be liable for or entitled to in a normal claim for damages. The most extreme form of compensation (which is also the most outdated) is the general form of compensation, whereby the contractor agrees to indemnify the owner for any costs, damages or liabilities, regardless of who is to blame. To protect themselves from such an apparently unfair provision, thirty-nine States have enacted anti-compensation laws that invalidate the general compensation provisions on grounds of public order. Many of these states have also restricted the intermediate compensation provision to prevent owners from seeking compensation for their own negligence. The first perception is often wrong.
Without a indemnification clause, a party may assert a claim for damages arising from the breach of contract of the other party, subject to a liability ceiling agreed between it on a commercial basis. Over the centuries, courts have developed rules to assess such claims in order to obtain a fair outcome based on the facts, taking into account that a loss or damage was reasonably foreseeable (i.e., not too far) and that the plaintiff took steps to reduce (mitigate) the impact (mitigation) of any damage resulting from the breach. The trigger for a claim for compensation is the suffering of damage covered by compensation. For this reason, the limitation period for a claim for compensation does not begin to run until the day on which the exempt damage is established. However, it seems clear that the inclusion of the words ”compensate” in an explicit obligation to pay compensation will add something and that the clause goes beyond an obligation to repay. In Deepak, the Court held that a promise of compensation is totally incompatible with a right of action. He noted that ”an agreement to indemnify and hold harmless necessarily implicitly contains an implied clause not to sue.” As the term implies, the purpose of a limited liability clause is to set a limit of liability for a party that is a party to a contract. The clause generally limits damages to a portion of the contract fee or transaction to a fixed dollar amount.
For example, let`s say you`re a contractor and a customer pays you $7,000 to install a new roof. You could include a liability clause that limits your liability to $7,000 if something goes wrong. .
