When are non-indemnification type clauses needed in a contract? In a lot of long contracts (the type people normally skim over) I often see sections about liability and indemnification. In general what are these and why are they necessary? Can someone give a simple example of an indemnification clause and what could happen if it wasn't in the contract? Is the main idea with a indemnification clause that it specifies who is responsible if it is found something illegal was done? If there is a breach in the contract, then you go to court, and if something illegal is done, it doesn't matter what the contract says, so I don't really get the use of an indemnification clause. How does "holding someone liable" relate to indemnification, are they synonyms? I am building a website for someone and am thinking if I should include this in a contract.
Here is an example: The Author agrees to hold harmless and indemnify the Journal and The University against any legal claim or action or expense of any nature arising from any claim of infringement of copyrights or proprietary rights resulting from publication of the manuscript or claims of libel, obscenity, unlawfulness or invasion of privacy arising out of anything contained in the manuscript as furnished by the Author. Suppose Author infringes the copyright of Jones, by copying large parts of it into Author's work. Author is now in legal trouble because he illegally copied stuff into his manuscript, but Journal is also in big (bigger) legal trouble, because it made many copies of Jones' word and sold them. Jones will now sue everybody, mostly the Journal (since Journal has money, and Author doesn't). Thanks to the indemnity clause, when Journal gets sued, all of the costs (of litigation and judgment) have to be born by Author. The primary purpose is to protect Journal from suits by third parties. Nothing can keep you from getting sued, but such a clause (theoretically) means that the person whom your contracting with has to cover the cost of his wrong-doing (assuming that he is not a turnip). The term "hold harmless" is there to guarantee that Author can't decide to sue Journal for publishing a libelous or infringing article. The functions are similar, but not totally the same: this and references therein could be interesting reading, by way of more details. He argues against using both terms, and instead you should use only "indemnify". In this case, the court said "When two words are used in a contract, the rule of construction is that the words have different meanings", which caused the court to assign distinct meanings to the words (which are typically used as though they mean the same thing), which doesn't seem to have been the original intent.
In my experience, varying jurisdictions can and do differ as to the myriad ways these disputes are resolved. Contract law is one area where the judge has a lot of discretion. This is definitely true in state courts, even from judge to judge, and can even be true in the federal level-The 9th Circuit has some wildly different appellate decisions when compared to the 1st Circuit, and so on. I say this not to be argumentative, but to highlight the importance of careful and concise drafting that fully explicates the bargained for exchange, as there can be a vast amount of judicial subjectivity that goes into determining which rules pertain to certain situations. "Conflicting or competing clause" cases are now some of the most commonly litigated contract disputes. This is largely because the last 20 years has seen a huge influx of people "drafting" (more like piecing together) contracts without benefit of qualified counsel. This is particularly true because lay people do not generally create a specific insturment like an attorney would - from scratch, with definitions and terms specific to the transaction. Rather, they go online and find "form" or model contracts that they feel are close enough (which are almost always missing key components), and then they type in their own terms, or even write them in. Because this is so common, most jurisdictions follow the rule that hand written terms supersede pre-printed terms; likewise, type written terms will take precedence over pre-printed terms. Specific terms also carry more weight than general terms. Specific terms will usually be given precedence over general terms, as these are seen as creating a specific exception to the general terms. For example, if Clause A in your scenario said: Written notice must be provided at least five days in advance of (any) change... (leaving out "to price"), then clause B would prevail because it would be more specific than the more general term (A), which in my scene would pertain to any change whatsoever (this is assuming the whole of the agreement did not shed light on the issues more fully). In your hypothetical, these are both specific terms. In that case, the court would first examine the entire contract and all addendum, specs, plans, etc. when interpreting competing or conflicting clauses applying the fundamental principal that a contract should always be interpreted as a whole - not clause-by-clause - and not section-by-section. Contracts will often have numerous parts with portions incorporated specifically by reference, or numerous documents that may be integral to the transaction, If the parties agree to what constitutes the various parts of the contract (even if not incorporated) the entirety of the transactional documents may be considered by the trier of fact (and law). Once examined, if a proposed interpretation makes other portions of the global agreement meaningless, illogical or unenforceable, and another party's interpretation is in keeping with the document as a whole, that is the interpretation that will typically be adopted. Assuming this analysis doesn't work to resolve the issue, then the court would look to see if there is an order-of-precedence clause, which is a clause that lays out what parts of the contract / types of clauses take precedence over others (ex. written requirements take precendee over performance requirements, addendum hold less import than the signed agreement, schematics hold less import than addendum, and so on). Assuming this there is no order of precedence, the court will look first to see if the contract was negotiated back and forth, with terms being modified with each draft. If Yes, then the court will except extrinsic evidence (parole evidence) that goes to the intent of the parties bargained for exchange. If not, the contract term(s) will be construed against the drafter and in favor of the one who signed the others' instrument. So, as you can see, there is no clear answer to what seems to be a simple issue. This just goes to show: Lawyers seem expensive when you decide to hire them - Lawyers are expensive when you have to hire them, because you decided not to in the first place!
This is a confusing issue in most common law jurisdictions and AFAIK, Canada and Australia still rely on common law definitions of this. First, any arrangement where someone provides services in return for compensation is a contract. If worker is an employee then the contract is an employment contract and is subject to whatever laws apply to employees (things like, workers' compensation, withholding of tax, superannuation etc.). If the worker is instead operating their own business that is independent of the principal's business they are independent contractors and employee law doesn't apply. In most cases it is easy to determine if someone is an employee or is a contractor. For example, if your business hires a bookkeeper to work set hours for which they are paid a salary from which you detect and remit tax, etc. then they are clearly an employee. Your external accountant who does your year end taxes, has their own premises and contracts to many other businesses is clearly an independent contractor. However, the dividing line is not clear cut in edge cases. Using British Columbia as an example: Calling a person an independent contractor, even if the worker agrees, does not decide the issue. In order to determine whether a worker is an employee or an independent contractor under the Act, it is important to consider the definitions of “employee”, “employer” and “work”. The Act defines these terms very broadly. The courts have developed some common law tests that may be useful, but they must be considered in a manner consistent with the definitions and purposes of the Act. Some of these tests include how much direction and control the worker is subject to, whether the worker operates their own business and has their own clients, whether the worker has a chance of profit or a risk of loss, whether the work they are doing is integral to the business and whether there is an ongoing relationship. The longer a person works for another, the more closely the worker’s duties are connected to the purpose of the business, the more the person who pays the worker controls the material and tools and directs the activities, the more likely it is that the relationship is one of employer/employee. So, deciding if a person is an employee or contractor is not up to the worker or the principal and what they may or may not have written on a piece of paper! The entire relationship must be considered. As an additional complication, legislation is not uniform between state/provincial and federal levels of government and even within the same jurisdiction. For example, in Australia, it is possible that a person is an independent contractor for Federal income tax law but an employee for state workers' compensation law.
The phrase is added to ensure that a portion of the contract is construed as the parties intended. For example, say the terms of a contract already imply some particular term. To make it clear that this is what the parties intended, they may also state that term explicitly. The problem is, if you specify a term a particular way, a party could argue that interpreting another part of the contract to mean that very same thing would render that portion of the contract redundant and therefore it should be interpreted some other way. The phrase "for avoidance of doubt" indicates a part of an agreement that is intended to restate what another portion of the contract (often in conjunction with applicable law) already implies. The phrase is added to ensure that the restatement won't be pointed to as a way to argue that other parts of the contract should be interpreted differently than intended. It is often used where it's superfluous and there it should be avoided because it will actually do the opposite of what's intended -- implying that what it covers is covered elsewhere when it actually isn't, possibly leading to other portions of the contract becoming ambiguous or subject to misintepretation.
You sue the legal person One of the things that distinguishes legal personhood from other structures is the ability to sue and be sued. You can't sue a business name or a trust for example but you can sue a company. I have in fact been required to make adjudication decisions that I know will be unenforceable in court because the applicant named a trust rather than the trustee.
why do they sometimes specify the federal law as well as the state/provincial law? Isn't it redundant? Not necessarily. The contract might be entered and/or performed in a different country, whence mentioning only the Canadian provincial law does not override the other country's federal law (or that country's &quot;supra-provincial&quot; equivalent). Mentioning Canadian federal law removes --at least on paper-- the ambiguity of which law applies for matters beyond the scope of Canadian provincial law. In such scenarios, portions or the entirety of the provision might be null and void. For instance, an employment contract might establish waivers which are void or perhaps even unlawful under the legislation of that other country. Please note that in general a copy/paste of sample clauses is strongly discouraged unless the parties fully understand their meaning and implications.
But even then, to my understanding, a contract can't prohibit a party from seeking legal remedies. You are mistaken. A contract settling a bona fide dispute regarding people's legal rights can mutually (or unilaterally for that matter) release or waive their legal rights. In fact, a waiver or release of rights is routinely a part of a settlement agreement. Hundreds of thousands, if not millions, of such agreements are entered into every year and they are almost always enforced. Sometimes, but not always, a settlement agreement will also call for a dismissal of a case with prejudice, which (roughly) means a dismissal that prohibits refiling a case involving the same subject matter.
It isn't uncommon to interlineate contract language, or to cross out contract language, with the initials of the parties to the contract. This is normally only done with smaller businesses, however, where there is someone who has the authority to do so. Some contracts, such as insurance contracts, for example, have to have their language approved by state regulators before they can be used and can't be modified in that fashion.