Pactora Clause Guide
Indemnities
An indemnity is a promise by one party to compensate the other for specific losses, costs, or claims — even if those losses weren't caused by a breach of contract.
This guide was written by Sneha Ganapavarapu, a qualified lawyer with experience in commercial contracts across technology, IP, and energy sectors. All legal sources are linked. This is general legal information, not legal advice. Always consult a qualified solicitor before signing any contract that matters to your business.
Plain English
What it is
An indemnity is a promise by one party to compensate the other for specific losses, costs, or claims — even if those losses weren't caused by a breach of contract. Indemnities sit outside the limitation of liability clause and can override it.
For UK freelancers & small businesses
What reasonable looks like
Mutual indemnities for specific, defined scenarios — typically IP infringement and data protection breaches.
Narrow and specific in scope.
Subject to a cap or connected to the limitation of liability clause.
Watch out for
Red flags
Broad indemnity covering any claim arising from your work.
One-sided indemnity running only in favour of the other party.
Indemnity that is uncapped and survives termination indefinitely.
Indemnity that includes consequential loss.
England & Wales
Market standard UK position
Mutual, specific, capped indemnities.
IP indemnity is common and reasonable.
Broad general indemnities are not market standard for freelancer or SMB contracts.
Legal advice triggers
Ask your lawyer if…
The indemnity is broad rather than specific.
The indemnity is uncapped.
The indemnity is one-sided.
You are being asked to indemnify a large corporate for any claim arising from your services.
References
Legal sources
Farstad Supply AS v Enviroco Ltd [2011] UKSC 16 — Supreme Court authority on construction of indemnity clauses and knock-for-knock provisions.
Caledonia North Sea Ltd v British Telecommunications plc [2002] UKHL 4 — House of Lords on indemnity clause construction and scope.
Unfair Contract Terms Act 1977 s.4 — indemnity clauses in consumer and non-negotiated contracts subject to reasonableness test.
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Further reading
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Related clause guides
Limitation of Liability
A limitation of liability clause caps how much one party can owe the other if something goes wrong.
IP Ownership
The intellectual property ownership clause determines who owns the work product created under the contract.
Data Protection
The data protection clause sets out how personal data is handled under the contract, who is the data controller, who is the data processor, and what obligations each party owes under UK GDPR and the Data Protection Act 2018.
Termination
The termination clause sets out the conditions under which either party can end the contract, how much notice is required, and what happens when the contract ends.