{"id":2548,"date":"2025-03-01T14:30:55","date_gmt":"2025-03-01T19:30:55","guid":{"rendered":"https:\/\/talkcounsel.com\/blog\/?p=2548"},"modified":"2025-03-01T14:38:49","modified_gmt":"2025-03-01T19:38:49","slug":"indemnity-clause-third-party-fix","status":"publish","type":"post","link":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/","title":{"rendered":"Why Indemnity Clauses Need a Third-Party Fix"},"content":{"rendered":"\n<p>When businesses sign contracts, they often include an indemnity clause\u2014a promise to cover costs if something goes wrong, like a lawsuit or a mistake. Sometimes, this promise isn\u2019t just for the companies signing the deal (say, Company A and Company B); it also protects nonparties\u2014people or groups like directors, related companies (affiliates), or even customers who aren\u2019t part of the contract itself.<\/p>\n\n\n\n<p>But here\u2019s where trouble can sneak in: many contracts have a \u201c<strong>no third-party beneficiaries<\/strong>\u201d clause. This says only the people signing the agreement can benefit from it\u2014no one else. If this clause isn\u2019t adjusted, it can accidentally block those nonparties from getting the protection the indemnity was supposed to provide. Lawyers need to catch this and make sure the contract doesn\u2019t leave anyone out in the cold.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>A Quick Example<\/strong><\/h3>\n\n\n\n<p>Imagine Company A agrees to protect Company B and its directors from lawsuits over a product they\u2019re selling together. The contract says Company A will pay if a director gets sued. But it also has a \u201c<strong>no third-party beneficiaries<\/strong>\u201d clause. One day, a director gets hit with a lawsuit and asks Company A to cover the costs. Company A says, \u201cSorry, you didn\u2019t sign the contract,\u201d and the clause backs them up. The director\u2019s left paying the bill, even though the deal meant to shield them.<\/p>\n\n\n\n<p><strong>Recommendation:<\/strong><a href=\"https:\/\/talkcounsel.com\/blog\/navigating-the-minefield-common-pitfalls-in-business-negotiations\/\"><strong> <\/strong>Navigating the Minefield: Common Pitfalls in Business Negotiations<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How to Fix It<\/strong><\/h3>\n\n\n\n<p>The fix is simple: either take out the \u201cno third-party beneficiaries\u201d clause or add a note saying it doesn\u2019t apply to the indemnity part. For instance, the contract could say, \u201cThis agreement is only for the signing parties, except for the indemnity clause, which covers directors too.\u201d Now, if that lawsuit happens, the director\u2019s protected\u2014Company A has to step up, just like they promised.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>A Real-World Case<\/strong><\/h3>\n\n\n\n<p>Picture a software company (Tullopy Inc) teaming up with a reseller (Chiggopay). Tullopy Inc promises to indemnify Chiggopay, its affiliates, and its customers against copyright claims from using their software. But the contract has a \u201c<strong>no third-party beneficiaries<\/strong>\u201d clause with no exceptions. A customer gets sued and expects Tullopy Inc to pay their legal fees. Tullopy Inc points to the clause and says, \u201cYou\u2019re not in the contract.\u201d The customer\u2019s stuck\u2014unless the clause had a carve-out saying the indemnity still applies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>In Sum<\/strong><\/h3>\n\n\n\n<p>An indemnity is like a safety net for risks. If it\u2019s meant to cover nonparties, a \u201c<strong>no third-party beneficiaries<\/strong>\u201d clause can rip a hole in it. Smart counsel will spot this and patch it up\u2014either by removing the clause or adding an exception\u2014so everyone gets the protection they\u2019re counting on. It\u2019s a small tweak that can save a lot of headaches down the road.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn why indemnity clauses need a fix to protect nonparties from &#8220;no third-party beneficiaries&#8221; risks.  <\/p>\n","protected":false},"author":1,"featured_media":2556,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2548","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-how-tos-tips"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why Indemnity Clauses Need a Third-Party Fix<\/title>\n<meta name=\"description\" content=\"Discover how a &quot;no third-party beneficiaries&quot; clause can block indemnity for nonparties and how to fix it with examples.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Indemnity Clauses Need a Third-Party Fix\" \/>\n<meta property=\"og:description\" content=\"Discover how a &quot;no third-party beneficiaries&quot; clause can block indemnity for nonparties and how to fix it with examples.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/\" \/>\n<meta property=\"og:site_name\" content=\"TalkCounsel&#039;s Blog\" \/>\n<meta property=\"article:published_time\" content=\"2025-03-01T19:30:55+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-03-01T19:38:49+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/talkcounsel.com\/blog\/wp-content\/uploads\/2025\/03\/pexels-a-darmel-8134100-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1706\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Christian Nwachukwu\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Christian Nwachukwu\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Why Indemnity Clauses Need a Third-Party Fix","description":"Discover how a \"no third-party beneficiaries\" clause can block indemnity for nonparties and how to fix it with examples.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/","og_locale":"en_US","og_type":"article","og_title":"Why Indemnity Clauses Need a Third-Party Fix","og_description":"Discover how a \"no third-party beneficiaries\" clause can block indemnity for nonparties and how to fix it with examples.","og_url":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/","og_site_name":"TalkCounsel&#039;s Blog","article_published_time":"2025-03-01T19:30:55+00:00","article_modified_time":"2025-03-01T19:38:49+00:00","og_image":[{"width":2560,"height":1706,"url":"https:\/\/talkcounsel.com\/blog\/wp-content\/uploads\/2025\/03\/pexels-a-darmel-8134100-scaled.jpg","type":"image\/jpeg"}],"author":"Christian Nwachukwu","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Christian Nwachukwu","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/#article","isPartOf":{"@id":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/"},"author":{"name":"Christian Nwachukwu","@id":"https:\/\/talkcounsel.com\/blog\/#\/schema\/person\/7378080e3720cbc3e300d4e4633776f3"},"headline":"Why Indemnity Clauses Need a Third-Party Fix","datePublished":"2025-03-01T19:30:55+00:00","dateModified":"2025-03-01T19:38:49+00:00","mainEntityOfPage":{"@id":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/"},"wordCount":474,"commentCount":0,"publisher":{"@id":"https:\/\/talkcounsel.com\/blog\/#organization"},"image":{"@id":"https:\/\/talkcounsel.com\/blog\/indemnity-clause-third-party-fix\/#primaryimage"},"thumbnailUrl":"https:\/\/talkcounsel.com\/blog\/wp-content\/uploads\/2025\/03\/pexels-a-darmel-8134100-scaled.jpg","articleSection":["How-Tos &amp; 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