Indemnity contracts are usually recommended and can be a great benefit to contractors, but as Orlando construction lawyers, we know that they can also become an area of contention in the construction industry. In this article, we’ll share why the provision could potentially be unenforceable.
The Purpose of the Provision
With an indemnity, contract parties agree that one party will take on all the liabilities and risks associated with the project. This includes any losses or injuries, or damage that occurs during the course of a project. Liabilities are shifted to one party even if that party is not negligent. What will be indemnified and to what extent will vary based on the project and the drafted contract.
What Are the Provision Requirements?
Many contractors feel they are safe once they have the provision drafted into their contract, but they must be certain they are in line with the requirements of Florida Statute 725.06 or else the provision is unenforceable. The Statute states that the provision must include “a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any…the monetary limitation can not be under $1 million unless per occurrence, unless the parties have agreed to it.”
Key Things to Remember When Drafting the Provision
Whenever you are negotiating your contract and adding an indemnity provision you should always rely on the assistance of a legal expert. Some key information you should think about before and while you’re drafting the provision are as follows:
- Who is doing the indemnifying?
- What is being indemnified?
- Is there a monetary limitation?
- Is there a reasonable commercial relationship?
- What are the terms of the contract?
- When will reimbursements for claims be made?
- Will this be a broad form, intermediate form, or limited form agreement?
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.