CONSULTANTS: Do you read (and understand) the indemnity clause in your contracts? Today I’m sharing 3 solutions for complex indemnity clauses in consulting contracts.
Indemnity clauses are scary
Everyone is frightened by indemnity clauses. It’s understandable… sometimes they go for half a page full of legal gibberish and incomprehensible sentences. So we ignore them and hope they’ll go away.
Indemnities can be tricky though…
No fault = uninsurable loss
If they’re not linked to fault, they may expose you to uninsurable loss. That’s because your PI insurance is most likely triggered by you (unintentionally) making a mistake.
Commercial return doesn’t justify the risk
Sometimes they cause you to take all of the risk, even when the client or another stakeholder contributed to the loss. If the client contributed to the loss by giving you poor instructions, wrong information or breaching the contract, don’t you think they should share the exposure?
And what about uncapped liability? If your scope is tiny in the overall scope of the project, you should also think about the maximum exposure that you’re prepared to accept. It should be proportionate to YOUR commercial return (not the project expenditure) and the risk connected with your work.
Here’s a little infographic to remind you of my 3 solutions for complex indemnity clauses. Introduce these to your contract to help manage your professional risks.