Indemnification

Indemnification is a contractual promise to absorb someone else's losses. If Party A indemnifies Party B, then A agrees to cover B's costs (damages, settlements, legal fees) arising from specific events, such as a third-party lawsuit over A's product or a breach of A's obligations.

Indemnity clauses are where real financial risk lives, so they are worth reading closely: what triggers the obligation, whether it is capped, and whether it is mutual or one-sided. Indemnification is usually read together with the limitation of liability clause, which sets the ceiling on what either side can owe.