Indemnity Agreement
An indemnity is a security against loss. This Indemnity Agreement obliges one party (the ‘indemnifying party’) to compensate another (the ‘indemnified party’) for a particular loss suffered by that party.
The indemnifying party may or may not be responsible for the loss suffered by the indemnified party.
What does Indemnity Agreement do?
It provides the indemnified party with a direct right to be compensated for a defined loss, on the terms set out in the agreement.
When should you use Indemnity Agreement?
An indemnity is often used where additional protection is required. Unlike a guarantee (where the borrower is primarily responsible and the guarantor’s liability is ancillary), an indemnifier’s liability is primary.
This Indemnity Agreement may be particularly useful where:
- A bank is providing a loan to a company and requires one or more companies in the same group to indemnify the bank against any loss
- Parties intend to enter into a longer-term agreement and a supplier requires its client to provide an indemnity to cover the risk of non-payment
If you also require a guarantee (whether alongside an indemnity or instead), you may need a separate guarantee agreement.
Other statutory note
The execution provisions of this template are compliant and consistent with the requirements of the Land Registry for prescribed form deeds introduced from 20 September 2019.
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