Indemnification
Also known as: Hold Harmless, Indemnity Clause
A contract provision where one party agrees to compensate the other for certain losses, damages, or liabilities. In builder contracts, indemnification clauses typically require the buyer to hold the builder harmless from various claims.
Detailed Explanation
An indemnification clause shifts financial responsibility for certain types of losses from one party to the other. In builder contracts, these clauses often require the buyer to indemnify (compensate) the builder for losses arising from the buyer's actions, negligence, or breach of contract.
Some builder indemnification clauses are very broad, potentially requiring the buyer to cover the builder's legal fees and losses even in situations where the builder shares responsibility for the problem.
Indemnification clauses are especially important if someone is injured on the property during construction or if there is a dispute with a neighbor or HOA that involves the builder.
In Your Contract
Look for "indemnify," "hold harmless," "defend and indemnify," or "indemnification" in your contract. These clauses may appear in the general terms section or in addenda related to construction access and warranties.
Key Points
- 1Indemnification shifts financial risk from one party to another.
- 2Builder contracts often require the buyer to indemnify the builder.
- 3Broad indemnification clauses can make you financially responsible even when the builder shares fault.
- 4Mutual indemnification (both parties indemnify each other) is more fair than one-way indemnification.
- 5Have an attorney review indemnification clauses before signing.
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