How To Contract

Today's contract tip is about the indemnifying party's right and obligation to defend against covered claims.

When I was a newer attorney, I thought of defense as only an obligation and an unfair one at that.

"You mean my client has to pay hundreds of thousands of dollars to defend a lawsuit to which it isn't even named and with no finding of fault? What?"

When my client was the indemnifying party, I drafted to get them out of it. I'd add limits that only required my client to reimburse for the defense costs only after a finding of my client's fault.

What I've learned over the years is that the indemnifying party in many situations wants to defend the action.

It is a right to defend, not just an obligation.

The indemnifying party will have to pay any damages and has the best incentive to vigorously and efficiently defend the action. This mindset is especially true when the indemnifying party's intellectual property is at issue.

So I no longer focus on getting out of the defense obligation. Instead, I make sure my client has control. It gets to decide the case strategy, including whether to settle or appeal.

How do you think of the defense obligation?

When your relationship with the vendor is starting to head down in a bad direction, you'll want to take some preliminary steps to prepare in order to have a successful termination process. Check out Laura Frederick's advice on how to get ready for successful termination in 4 steps: https://loom.ly/wPX2Rmc

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https://loom.ly/wPX2Rmc

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