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IANAL, but I owned my own tiny business for a few years. Here's what you need to know about indemnification clauses: - your lawyer will zero in on them like a

IANAL, but I owned my own tiny business for a few years. Here's what you need to know about indemnification clauses: - your lawyer will zero in on them like a fly to poop - you could easily spend thousands on lawyers playing indemnification clause ping-pong; provide guidance that you only care about "egregious" clauses - the larger/more powerful party will always get the indemnification clause they want - if a claim is ever made against you, you might be going out of business; that's life - get business insurance and spend your time worrying about other things This is not to say indemnification clauses are not legally important. They are! But there's almost nothing that plucky little startup.com can do about GlobeCorp's GC's office devotion to their indemnification clause. It's part of the risk of running a business. Make sure your business's corporate paperwork is in order so the "corporate veil" cannot be "pierced" and continue on with life.

keenrodent 10y ago
Similarly IANAL, have owned, operated, and sold a smallish software business. I agree 100% with the above advice, but would like to highlight and amplify the previous comment's last sentence, 'cause that's the hinge: Make sure your business's corporate paperwork is in order so the "corporate veil" cannot be "pierced" and continue on with life. Don't sign any contract with an indemnity clause if you're not structured so that the corporation takes the risk.
jwilliams 10y ago
Yup. GlobeCorp is trying to transfer risk to startup.com. So they push these types of clauses. The reality is that startup.com can't manage that level of risk if it actually materialized (they'd fold)... so GlobeCorp really hasn't managed their risk at all.
- dublinclontarf 10y ago
  What risk? If it's litigation risk pushing it onto startup.com now gets GloboCorp off the hook. startup.com goes out of busiiness, GloboCorp is fine. If it's risk of simple failure then maybe.
  - jasode 10y ago
    >If it's litigation risk pushing it onto startup.com now gets GloboCorp off the hook. That's not how indemnity works. If Apple sells a Macbook with a flawed battery that explodes in consumers' laps, the plaintiffs will sue _Apple_ and not the outsourced Chinese battery factory. Just because the Chinese company agrees to an indemnity clause, it doesn't prevent lawyers for the plaintiffs to name Apple as the defendant on the lawsuit. Indemnity is about monetary compensation from the other party and not some type of shield against lawsuits. That means that Chinese company compensates Apple's cost of lawyers and losses to pay judgments and settlements. To grandparent poster's point, if Chinese battery company goes out of business, the indemnity clause means nothing since Apple was unable to receive reimbursement from that manufacturer.

keenrodent 10y ago

Similarly IANAL, have owned, operated, and sold a smallish software business. I agree 100% with the above advice, but would like to highlight and amplify the previous comment's last sentence, 'cause that's the hinge: Make sure your business's corporate paperwork is in order so the "corporate veil" cannot be "pierced" and continue on with life. Don't sign any contract with an indemnity clause if you're not structured so that the corporation takes the risk.

jwilliams 10y ago

Yup. GlobeCorp is trying to transfer risk to startup.com. So they push these types of clauses. The reality is that startup.com can't manage that level of risk if it actually materialized (they'd fold)... so GlobeCorp really hasn't managed their risk at all.

dublinclontarf 10y ago
What risk? If it's litigation risk pushing it onto startup.com now gets GloboCorp off the hook. startup.com goes out of busiiness, GloboCorp is fine. If it's risk of simple failure then maybe.
- jasode 10y ago
  >If it's litigation risk pushing it onto startup.com now gets GloboCorp off the hook. That's not how indemnity works. If Apple sells a Macbook with a flawed battery that explodes in consumers' laps, the plaintiffs will sue _Apple_ and not the outsourced Chinese battery factory. Just because the Chinese company agrees to an indemnity clause, it doesn't prevent lawyers for the plaintiffs to name Apple as the defendant on the lawsuit. Indemnity is about monetary compensation from the other party and not some type of shield against lawsuits. That means that Chinese company compensates Apple's cost of lawyers and losses to pay judgments and settlements. To grandparent poster's point, if Chinese battery company goes out of business, the indemnity clause means nothing since Apple was unable to receive reimbursement from that manufacturer.