Welcome to the Kazi Law Firm! We are a boutique law firm steeped in Texas tradition personifying the warmth and congeniality consistent with southern hospitality. We believe in preserving integrity and professionalism with true Texan charm, staying true to our roots, while providing essential, affordable legal services to all. Located just north of Dallas, Texas in the rapidly growing suburb of Frisco; the Kazi Law Firm concentrates on contracts drafting and review, immigration law, will & estates, real estate law, landlord, tenant, mediation, and general business law needs.
Often times, during the course of a business transaction, we hear the word “indemnification” or are asked to sign an “indemnity agreement.” Clients often come to us inquiring as to what this agreement is and whether or not they should sign it? Today, I wanted to discuss this vital document in further detail and explain what exactly it says in laymen’s terms.
Quite simply, an indemnity agreement allows you to limit your liability during any transaction for any claims brought by a third party. Indemnity agreements are commonly used when the acts of another party can put you at risk. This type of agreement is an exceptional tool to help parties accomplish their goals by efficiently dividing responsibility for legal risks. Do you see how this agreement would be beneficial in your business?
You may have also heard of the term “hold harmless.” What does this unique term of art mean? When the terms indemnification and hold harmless are examined independently of each other, they have separate meanings. Indemnity is a contractual obligation to repay an indemnified party (the indemnitee) any actual losses that party may incur. The implication of this is that the indemnitee must actually have incurred a quantifiable loss before the obligated party (the indemnitor) is bound to pay. Such losses normally occur where the indemnitee loses a lawsuit or receives a fine/penalty of some sort.
Moreover, hold harmless is similar to indemnity but goes one step further. For example, instead of merely being responsible for actual losses, the indemnitor must assume all liability and costs that the indemnitee has incurred. This contractual duty remains even if there is no judgment passed or fine given. Even though there is a difference between indemnity and hold harmless, in practice most courts now consider them to be essentially the same thing.
There are three classes of indemnity protection available:
Broad Form Indemnity:
Broad indemnity is the most extensive form of indemnity there is. With broad indemnity the indemnitor assumes all risk and liability no matter who is at fault. This form of indemnity is seen as the most beneficial for the indemnitee, but very risky for the indemnitor. The level of risk for the indemnitor is so high that some states, such as Texas, do not even allow this level of indemnity to take place. Other states will not allow broad indemnity for certain types of contracts.
No. In 2011, the Texas Anti-Indemnity Act was passed limiting broad form indemnities in construction contracts. It’s important to note that the law cannot be waived, which means parties to a contract cannot agree to a broad form or intermediate form indemnity in an effort to circumvent the law in Texas.
Intermediate indemnity is the most common form of indemnity. With intermediate indemnity the indemnitor assumes liability if it has contributed to the fault. If the indemnitee is solely at fault, the indemnitor is not liable. However, if even partly at fault, the indemnitor still must assume all liability.
Limited indemnity offers the least protection to the indemnitee, and there are some that do not believe that it should even be a class of indemnity. Limited indemnity holds the indemnitor liable for the portion of fault they are responsible for. This form of liability would exist under tort law even without an indemnity agreement. However, some parties like to formalize this arrangement in writing.
Finally, it’s imperative to remember that if the indemnity agreement is being executed in conjunction with another contract, the indemnity agreement should either be executed before or at the same time as the other contract. Once the indemnity agreement has been completed, simply have all parties sign and date to complete the document. Although not required, it is always a good idea to have the document notarized for extra protection. As always, an experienced attorney is the best resource for drafting a legally binding indemnification agreement for your business.
I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question…Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”
As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect and understanding, we treat yours. Come join the Kazi Law Firm family today!
Why swim alone in shark-infested waters when you don’t need to?