Honor! Valor! Indemnity!

Congratulations!  You just got a good paying gig that’s going to get you through the next couple months.  It’s a company that pays on time and work that’s creatively interesting.  A badly needed signing bonus is yours as soon as you return the contract. (c) Marc van der Chijs via flickr.com Because you read this blog, you’re reading through the contract.  You find a section that seems to be written in a foreign language: “Indemnification.”  You don’t really understand what it means, but it looks intense.

You wouldn’t be the first person to skim it over, hope it never, ever applies to you, and sign the contract anyway.  But, since you’re not just anyone, here’s a bit more information about what that section means.  Hopefully you can use this info to have better conversations with your clients about your contracts.

What is “Indemnification”?

Indemnification is the pinky swear of contracts.  It is the promise that the promises you’ve made are true.

Let’s say I hire you to draw Daffy Duck. Central to our agreement that you will draw Daffy Duck is the promise that you can draw Daffy Duck.  If I am concerned that I might lose money or be sued if you cannot draw Daffy Duck, I might ask that you indemnify me from that harm.

If you agree to indemnify me, you are saying that you’re so sure you can draw Daffy Duck, that if you can’t, you will stand between me and any harm I might face because of it.

What does that mean?

It means if someone sues me, you’ll step in and be sued instead.

It means if someone fines me, you’ll step in and pay the fee instead.

It means if I lose money that is related to your inability to draw Daffy Duck, you’ll pay me for whatever loss I incur.

Why have indemnification in contracts?

Indemnification is a way of sharing the risk in a contract.

For the person being indemnified, it is a way for them to be protected against a risk they might not be aware of.

For the person doing the indemnifying, it is a way of saying, I can promise these things for certain, but nothing more.

In freelance art contracts, you’ll often see indemnification regarding the artist’s promise that the work they’ll produce is original and that they have the right to sell the rights to that work.  This is extremely important for the buyer of the work because they likely want to use the work they’re buying.

Take the situation of you and me and that image of Daffy Duck.  I want to use what you make for me in my business.

I think you are the original creator of that image and part of our contract will be that you are selling or licensing me the right to use that image.  Part of the contract I give you says that you’ll indemnify me for any intellectual property violations I incur from using that image.

Copyright license choice

Photo by opensourceway

But you copied that image and you can’t sell me the right to use it; only Warner Brothers could do that.

If you were to sign the contract without reading it, as soon as the Brothers Warner come knocking on my door for violating their copyright, I’m going to send them your way and you’ll be the one responsible for paying any fines.

Now let’s say instead I use that image of Daffy Duck on a huge poorly constructed plywood sign outside of my business.  Not shockingly, the sign comes loose and harms someone coming into my business.  They sue me for their medical costs.  I cannot come after you for indemnification of that harm.  The sign falling on the individual has nothing to do with intellectual property; you are not responsible for it under our contract.

How should you deal with indemnification in a contract?

The most important thing to do is to understand what promises you are making.  The second most important?  Only promise what you can.

Understanding what you’re promising means that you can identify what situations or events might call the indemnification clause into play.

Are you promising that the work you’re producing is original or that it can be used for a particular purpose?

Is there a time limit to your promise?

If you cannot easily identify what you are indemnifying, don’t sign the contract.  Point out the issue to your client and ask, “What are you trying to protect against?  It’s not clear to me and I want to make sure I can back this up if you need me to.”

Which leads to the second issue: only promise what you can.  Frankly, as the artist, you are in the best position to know if the work you are providing is original or copied from someone else.  It’s fair that you be responsible for that promise.  But it’s not fair to ask you to promise that no matter how the client decides to use the work, they’ll be home free.

Tips, Tricks & other Ideas

  • Instead of “Indemnification” you might see a section entitled “Warranties.”  Though slightly different from a legal perspective, it’s aiming toward the same end: protection if promises are broken.
  • Make it easy to figure out what you’re indemnifying the client for by listing those promises in the same section; then limit the indemnification only to those promises.  Here’s an example I particularly like:

“Artist represents and warrants that (a) the Work is original work created by Artist that has not been published elsewhere, (b) Artist has full right and authority to grant all Rights granted to [Client] in this Agreement , and (c) the Work does not infringe the copyrights, trademarks or other rights of another person or entity. Artist will indemnify and hold harmless [Client] against any damages sustained or expenses incurred (including reasonable attorneys’ fees) in connection with any claim, action or proceeding based on an actual or alleged violation of these representations and warranties.”

  • Beware the “now or in the future” language.  It’s not always bad, but it can be.   If it implies that you can stand by your promise “now and in the future,” that’s aces.  If it implies that you’ll protect against something that no one knows exists right now, it’s not so great.

By Matito via flickr.com

Indemnity is pretty awesome, when you think about it: an oath that my promises are true.  To me, it’s a very honorable-Three-Musketeers-ish portion of a contract.  You might not always have the luxury of negotiating it in every contract you sign, but that doesn’t mean you can’t at least understand the promises you’re making & risks you’re agreeing to.

Categories: Making Sense of Contracts

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One response to “Honor! Valor! Indemnity!”

  1. Joseph Ston says:

    If you’ve agreed to indemnify in instances of ALLEGED violations, your promises and realities that your warranties are true are of no value and do not protect you. Anyone can allege anything, and you’ve committed to picking up the tab for expenses connected with that anything.

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