Indemnity Clause in UK Contracts: What It Means & Example Wording

When to Include a Indemnity Clause

• When one party is taking on a specific risk that could result in third-party claims — for example, an IP indemnity where the supplier warrants that its product does not infringe third-party IP
• When a contractor or subcontractor could cause loss to the client's customers or end users through their work
• When there is a data processing relationship and the data processor needs to indemnify the controller against claims arising from data breaches

Example Wording

This example wording is illustrative only. Customise it to your specific circumstances and consider seeking legal advice.

Is a Indemnity Clause Enforceable in the UK?

Indemnity clauses are enforceable in the UK. However, they are subject to the same statutory controls as limitation clauses under UCTA 1977 and the Consumer Rights Act 2015 where applicable. An indemnity in a consumer contract must be fair under the unfairness test. In business-to-business contracts, indemnities are generally upheld, but courts will consider whether they are subject to any overall liability cap in the contract. The key advantage of an indemnity over damages is that recovery is on a pound-for-pound basis without the need to prove remoteness, foreseeability, or mitigation (unless the contract states otherwise).

Common Mistakes

• Giving an open-ended indemnity without a cap — unless this is deliberate, an uncapped indemnity can create unlimited exposure that may not be covered by insurance
• Failing to include procedural requirements such as prompt notification, cooperation, and sole conduct of defence — without these, the indemnifier loses control of the claim
• Not clarifying whether the indemnity is subject to the overall liability cap in the contract or sits outside it