An indemnity clause is often copied from an earlier agreement and rarely examined until something goes wrong.
That is precisely when its wording becomes important.
A carefully drafted indemnity should identify the risks being allocated, the persons protected, the triggering events, the relationship with third-party claims, notice requirements, defence of claims, exclusions and financial limitations where appropriate.
For a business, the difference between “indemnify against all losses” and a clause tied to specific risks can be commercially significant. The parties should also consider whether the indemnity overlaps with insurance, limitation of liability or other contractual remedies.
The Indian Contract Act contains provisions dealing with contracts of indemnity, but the final risk allocation depends on the contract and applicable law.
Indemnity drafting is therefore not a boilerplate exercise. It is risk engineering in contractual form.