Indemnity Form Template: What to Include

An indemnity form can look simple, but it often shifts serious risk from one party to another. That is where many New Zealand businesses get caught. Common mistakes include signing a broad indemnity without checking the trigger events, using a generic indemnity form template that does not match the deal, and assuming an indemnity works the same way as insurance or a normal liability clause. Another frequent problem is relying on a supplier's standard wording before you understand who is paying if something goes wrong.

The practical question is not just whether an indemnity should be in the contract. The real issue is what the clause actually covers, what it leaves out, and whether the wording is fair for your business. A well-drafted indemnity can allocate risk clearly. A poor one can expose you to open-ended claims, legal costs, and losses that are out of proportion to the value of the deal.

This guide explains what an indemnity form template usually includes, what New Zealand businesses should check before they sign, and the common drafting mistakes that cause trouble later.

Overview

An indemnity is a promise by one party to compensate another for specified loss, damage, cost, or liability. In business contracts, indemnities are often used to deal with risks that one party is better placed to control, such as third party claims, property damage, confidentiality breaches, or IP infringement.

The wording matters because a broad indemnity may go further than ordinary damages for breach of contract. It can also affect who pays legal costs, whether indirect losses are caught, and how quickly a claim can be made.

• who gives the indemnity and who benefits from it
• the exact events that trigger the indemnity
• the types of loss covered, such as direct loss, third party claims, legal costs, or property damage
• whether the indemnity is capped, time-limited, or subject to exclusions
• whether the indemnified party has obligations to mitigate loss or notify claims promptly
• how the indemnity interacts with limitation of liability clauses and insurance
• whether the wording fits New Zealand law and the actual commercial arrangement

What Indemnity Form Template Means For New Zealand Businesses

An indemnity form template is only a starting point, not a finished legal document. If the template does not match the transaction, it can create risk instead of reducing it.

In plain English, an indemnity says, “if this specific problem happens, I will cover your loss.” You will often see indemnities in supply agreements, service agreements, contractor agreements, leases, software terms, event arrangements, logistics contracts, and confidentiality agreements.

What An Indemnity Usually Does

A standard indemnity clause allocates responsibility for a defined type of loss. For example, a software provider might indemnify a customer for third party claims that the software infringes intellectual property rights. A contractor might indemnify a principal for damage caused by the contractor's negligence at a site. A venue might ask an event organiser to indemnify it for damage caused during the event.

The point is to make responsibility clearer before a problem happens. That can save time and reduce disputes, but only if the wording is precise.

What An Indemnity Is Not

An indemnity is not the same as a general statement that each party is responsible for its own acts. It is also not the same as insurance. Insurance is a separate arrangement with an insurer, subject to policy terms, exclusions, and claim procedures.

An indemnity also does not automatically mean unlimited liability, although many standard templates are drafted broadly enough that the practical effect can feel close to that. That is why founders should look carefully at the scope and any cap.

Where New Zealand Businesses Commonly See These Clauses

Indemnities appear in many everyday commercial documents, including:

• supplier and customer agreements
• consultancy and contractor agreements
• distribution and reseller arrangements
• commercial leases and licence agreements
• technology contracts, including SaaS and software development agreements
• NDAs and information-sharing arrangements
• event booking terms and hire agreements
• transport, warehousing, and logistics contracts

Many businesses first encounter an indemnity when a larger customer or supplier sends standard terms and asks for a quick signature. That is often the worst time to accept a broad clause without a contract review, especially if the contract value is modest but the indemnity exposure is not.

Why Templates Often Need Editing

Template wording is usually written to be reusable across many industries. That means it can be too broad, too vague, or missing deal-specific details. New Zealand businesses should be especially careful where a template:

• uses undefined terms like “all loss” or “any claims whatsoever”
• does not say whether the indemnity applies to third party claims, direct losses between the parties, or both
• does not explain whether legal fees are covered
• ignores the effect of the Fair Trading Act 1986 or other legal obligations that cannot simply be drafted away
• conflicts with another part of the contract, such as the liability cap
• copies wording from overseas legal systems without adjustment to New Zealand context

This is where founders often get caught. The template looks familiar, but key risk points are hidden in broad phrases that only become obvious once a dispute starts.

What To Include In An Indemnity Form Template

A useful indemnity form template should clearly set out the commercial bargain. Depending on the deal, you may want to include:

• the names of the parties and any related entities covered
• the specific acts, omissions, breaches, or events that trigger the indemnity
• whether fault is required, for example negligence, breach, or wilful misconduct
• the losses covered, such as claims, damages, liabilities, settlements, and reasonable legal costs
• any excluded losses, such as indirect or consequential loss
• a financial cap, where appropriate
• a time limit for making claims under the indemnity
• notice and claim-handling procedures
• rights to control defence or settlement of third party claims
• carve-outs where the receiving party contributed to the loss
• any requirement to maintain insurance
• how the indemnity works alongside confidentiality, IP, privacy, and general liability clauses

The right drafting approach depends on the transaction. A one-page event form will not need the same level of detail as a technology services agreement or construction-related contract.

Legal Issues To Check Before You Sign

The safest approach is to treat an indemnity as a separate risk clause, not boilerplate. Before you sign a contract, read it as if the worst-case scenario has already happened.

1. What Exactly Triggers The Indemnity?

The trigger should be specific. If the wording says you indemnify the other party for “any loss arising out of the agreement”, that may be much wider than necessary. It may catch losses only loosely connected to the contract.

Better drafting usually ties the indemnity to clear events, such as:

• your breach of confidentiality
• your negligence
• your infringement of someone else's intellectual property
• damage caused by your personnel or equipment
• your breach of law, where that is relevant and appropriate

Ask whether the trigger matches a risk your business can actually control. If not, push back before you accept the provider's standard terms.

2. Is The Indemnity One-Way Or Mutual?

Many templates favour the stronger party. A customer may ask the supplier for wide indemnities while offering none in return. Sometimes that is commercially expected. Often it is just a starting position.

If both parties control meaningful risks, a mutual indemnity may be more sensible. For example, each party could indemnify the other for its own confidentiality breach or IP infringement. The right structure depends on bargaining power and who is best placed to manage the risk.

3. What Losses Are Covered?

Loss can mean very different things depending on the clause. Some indemnities cover only direct losses. Others extend to third party claims, legal expenses, settlement amounts, and internal costs.

This is a good place to slow down. If the clause covers “all losses, damages, expenses and costs”, ask:

• does it include legal costs on a full indemnity basis
• does it include indirect or consequential loss
• does it include loss of profit or reputational harm
• does it include claims made by third parties
• does it include losses caused partly by the other party

The broader the list, the greater your exposure. If the clause is silent, the contract may become harder to interpret later.

4. Is There A Liability Cap?

An uncapped indemnity can create a major imbalance. If the contract value is $20,000 but the indemnity could expose you to hundreds of thousands of dollars in third party claims, you need to know that before you sign.

Some contracts cap all liability but carve indemnities out of the cap. Others apply the cap to some indemnities but not others. Common examples of uncapped or separately capped indemnities include IP infringement, privacy breaches, fraud, and deliberate misconduct.

There is no universal answer, but the key is consistency. The overall liability position should reflect the real commercial risk and the parties' insurance arrangements.

5. Does The Other Party Have To Notify You And Mitigate Loss?

An indemnity should not let the other side sit on a problem and send you a bill later. Good drafting often requires prompt notice of claims and reasonable steps to reduce loss.

For third party claims, the contract may also need to say:

• who controls the defence
• whether you can appoint lawyers
• when a settlement can be agreed
• what cooperation the indemnified party must provide

Without these details, disputes can arise over legal strategy, delay, and settlement decisions.

6. Does The Clause Fit With New Zealand Consumer And Fair Trading Rules?

You cannot contract out of every legal responsibility in every situation. The effect of a risk clause may depend on the nature of the parties and the transaction.

For example, the Consumer Guarantees Act 1993 and Fair Trading Act 1986 can matter where goods or services are supplied in trade, especially if standard terms are being used broadly. In business-to-business deals, some statutory rights may be able to be modified or contracted out of if legal requirements are met, but that needs careful drafting and written terms, and is not something to assume from a template.

If a clause appears to shift all responsibility to one side regardless of misleading conduct, service quality, or statutory obligations, get it checked before you rely on a verbal promise that “everyone signs it”.

7. Does Privacy Or Confidentiality Risk Need Separate Treatment?

Many templates mention data loss or confidentiality in a single sentence, even when the deal involves sensitive business information or personal information. That may not be enough.

If your business handles customer data, employee information, or commercially sensitive material, the contract may need separate clauses dealing with privacy compliance, security obligations, notification, and specific indemnities for serious breaches. Under the Privacy Act 2020, businesses need to handle personal information carefully, and contract wording should support those obligations rather than blur them.

8. Is Insurance Meant To Back Up The Indemnity?

If a party gives an indemnity, it is common to ask whether that risk is insured. The answer is not always yes. Some losses may fall outside policy cover, and some policies will not respond if the indemnity goes further than liability at law.

Before you sign, check:

• what policies are in place
• the policy limits
• whether contractual liability is covered
• whether certificates of currency are required
• whether the indemnity should be limited to insured risks in some cases

This is a practical issue as much as a legal one. An indemnity is worth more on paper if the party giving it has the financial capacity or insurance to stand behind it.

Common Mistakes With Indemnity Form Template

The biggest mistake is treating the indemnity as standard wording that can be ignored. Most problems come from broad drafting, poor fit, or internal inconsistency.

Using A Generic Template Without Matching It To The Deal

A template drafted for a physical services business may be a poor fit for a software provider, importer, landlord, or event organiser. The risk profile is different, so the indemnity should be different too.

If the template does not reflect the goods, services, site access, data handling, or IP issues in the transaction, it may miss the real risks while imposing unnecessary ones.

Confusing Indemnity With Limitation Of Liability

Some founders negotiate a general liability cap and assume the issue is sorted. Then they discover the indemnity sits outside the cap or overrides part of it.

This is where careful drafting matters. The contract should clearly say whether the indemnity is subject to the cap, has its own cap, or is excluded from the cap. Silence can be expensive.

Accepting “All Losses” Language

Very broad wording can sweep in remote or unexpected losses. If the other party wants a wide indemnity, ask them to explain the specific risk they are trying to address. Often the clause can then be narrowed to something more proportionate.

For example, a supplier may reasonably indemnify a customer for third party IP claims, but not for any loss “connected with” the customer's use of the product in any context whatsoever.

Leaving Out Claim Procedures

If a third party makes a claim, both sides need a clear process. Without notice rules and defence rights, one party may settle too early, spend heavily on lawyers, or fail to share information.

That turns a risk allocation clause into a second dispute about procedure.

Ignoring Contributory Fault

Some templates require one party to indemnify the other even where the receiving party caused or contributed to the loss. That may be commercially unfair and can lead to arguments later.

A common fix is to exclude loss caused by the indemnified party's own negligence, breach, or misconduct, or at least reduce the indemnity to reflect its contribution.

Forgetting About Time Limits

An indemnity with no time limit may remain live long after the commercial relationship ends. In some cases that is appropriate, especially for confidentiality or IP issues. In others, it creates uncertainty that lasts too long.

Think about whether claims should be brought within a set period after termination, delivery, or the event giving rise to the claim.

Using Overseas Wording Without New Zealand Review

UK, Australian, or US templates often circulate widely. They can be useful references, but they should not be copied blindly. Definitions, liability concepts, statutory references, and drafting assumptions do not always translate neatly.

If the indemnity form template was pulled from an overseas source, it is worth checking that the wording works with New Zealand contract law, local commercial practice, and the rest of your agreement.

Relying On The Other Side's Verbal Explanation

A common founder moment goes like this: the counterparty says the indemnity is “just standard” or “only there for serious misconduct”, but the actual wording says something much broader. If the contract later gets enforced according to its text, that verbal reassurance may not help much.

Before you sign, ask for the wording to match the explanation. If the clause is meant to be narrow, write it narrowly.

FAQs

Is an indemnity the same as a waiver?

No. A waiver usually involves giving up a right or claim. An indemnity is a promise to cover specified loss or liability if certain events happen.

Can I use a free indemnity form template for my business?

You can use a template as a starting point, but it should be checked against your actual contract and risk profile. Free templates are often too broad, too generic, or drafted for another country.

Should an indemnity always be capped?

Not always, but many businesses should at least ask the question. A cap can make the risk more proportionate, especially where the contract value is limited and the indemnified risk is not entirely within your control.

Does an indemnity cover legal costs automatically?

Not necessarily. The clause should say whether legal costs are included, and if so, on what basis. Clear wording reduces later arguments.

Can an indemnity override the rest of the contract?

Sometimes the drafting gives an indemnity special treatment, for example by excluding it from the liability cap. That is why the indemnity should be read alongside the limitation of liability, insurance, confidentiality, and dispute clauses before you sign.

Key Takeaways

• An indemnity form template should be tailored to the actual deal, not copied in blindly.
• The most important points are the trigger events, the losses covered, any cap or exclusions, and the claim procedure.
• Broad wording such as “all losses” or “arising out of” can create far more risk than many business owners expect.
• The indemnity needs to work with the rest of the contract, especially limitation of liability, insurance, privacy, confidentiality, and IP clauses.
• New Zealand businesses should be cautious with overseas templates and standard terms offered on a take-it-or-leave-it basis.
• Before you sign, make sure the wording reflects the real commercial understanding, not just a verbal summary from the other side.

If you want help with contract drafting, negotiating liability caps, checking insurance alignment, or reviewing standard contract terms, you can reach us on 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.