The Uncapped Indemnity Clause That Can Sink a Small Agency
What this clause actually says
Indemnification means one party agrees to cover the other party's losses and legal costs. The danger is when it is "uncapped" (no dollar limit) and "one-sided" (only you indemnify them, never the reverse).
Why it matters to you
A single uncapped indemnity clause can expose a small agency to unlimited liability — their legal fees become your bill, even for a dispute you did not cause. It is the clause that most often kills a small shop.
How to fix it before you sign
Ask for mutual indemnification and cap your liability at the contract value (or 12 months of fees). Reject language that makes you pay for the client's own negligence.
Ctrl+F for these phrases
- →
indemnif - →
hold harmless - →
defend
Quick answers
What is a one-sided indemnification clause?
A clause that requires you to cover the client's legal costs and losses, but gives you no reciprocal protection. It is a one-way risk transfer that leaves a solo operator carrying all the downside.
Can I negotiate an indemnity clause?
Yes, this is one of the most commonly negotiated clauses. A mutual clause with a liability cap at the contract value is a standard, reasonable ask. Have counsel confirm it is drafted correctly.