Contractors' Questions: Is my contract's indemnity as bad as it sounds?

Contractor’s Question: A clause I’ve been asked to sign as a contract web developer who’s about to code a website for a client is virtually identical to this IPR clause, but my bigger concern is the indemnity that goes with it.

The indemnity seems to suggest that if anything goes wrong or if the client decides to make a claim (for example if they say I did not deliver the project on time), they will be able to come after me for a loss to profits. Is this indemnity, reproduced below, as bad for me as it sounds?

‘The Contractor will indemnify and keep the Company indemnified against all claims costs proceedings demands losses damages expenses or liabilities whatsoever arising directly or indirectly as a result of any breach by the Contractor of any representations warranties or other terms contained within this Agreement.’

Expert’s Answer: This clause is indeed known as an indemnity and it is crucial that you understand all of the terms of the contract it’s taken from  before signing on the dotted line.

This indemnity makes it clear that by signing the contract, the contractor is making certain statements. Although I do not have access to the full contract, I can safely assume there are clauses in it relating to the contractor’s capabilities as a web developer, and that they are not using a third party’s intellectual property in this contract.

If, for example, it later transpired that the contractor is not a web developer and they have been idling the days away playing solitaire, then the company would want to recover the losses incurred as a result.

Using another example, if the company were contacted by a solicitor after the project had been completed and informed that the new website code and content has been copied verbatim from a competitor’s website, who now intends to sue for infringement, then the company would clearly prefer for the contractor to be held ultimately responsible.

The important point to note is that the indemnity only applies to representations and warranties made by the contractor and the terms agreed by them. If the contract contains, for example, a term stating that the contractor will deliver a fully functioning website in accordance with an agreed specification by a certain date, then they will be held to this (barring any exceptional circumstances beyond the control of the contracting parties). It would be prudent to thoroughly reread the contract and ensure you understand precisely what you are signing up to. 

The expert was Mekael  Rahman, trainee solicitor at Lawdit Solicitors.

Editor’s Note: Related Reading –

Why IT contractors must check indemnity tenses

Contractors’ Questions: Should I resist the indemnity?

Contracting out of your obligations upon failure isn’t easy

Thursday 30th Jul 2015
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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