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Indemnity Agreement Cost

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What does an indemnity agreement cost? Business owners often ask who needs liability protection due to their business practices. Let’s explore this question and review some general information about indemnity agreements and how they work.

How Much Does an Indemnity Agreement Cost?

An indemnity agreement, sometimes called a hold harmless agreement or release of liability agreement, is a legally binding contract between two parties in which one party agrees to absolve the other party from responsibility for any damages or injuries related to a specific action or job.

Indemnity agreements are most often used by businesses that provide a service to customers that carry a risk of injury or damage. By signing an indemnity agreement, the customer is acknowledging the risks and agreeing to release the business from any liability for injuries or damages that may occur.

For example, a skydiving company will make customers sign an indemnity agreement before they are allowed to skydive. The agreement will inform the customer that they are about to participate in a dangerous activity that could lead to injury or death.

Once the customer signs the agreement, they have relinquished their rights to sue the skydiving company if they are injured during the activity.

The two main types of indemnity agreements are unilateral indemnity agreements and reciprocal indemnity agreements.

  1. Unilateral Indemnity Agreement. One party agrees to release the other party from liability for injuries or damages.
  2. Reciprocal Indemnity Agreement. Both parties agree to absolve each other of liability for injuries or damages.

Indemnity agreements are important documents used to protect a business from costly lawsuits. For this reason, many business owners choose to hire an attorney to draft their indemnity agreement.

An attorney will ensure that the indemnity agreement includes all necessary terms and conditions and abides by state laws that govern these types of contracts.

Based on ContractsCounsel’s marketplace data, the average cost of a project involving an indemnity agreement is $575.00.

What’s Typically Included in an Indemnity Agreement

Indemnity agreements can be customized for businesses based on their services and the type of activity the contract covers. As a result, indemnity agreements are found in many industries, from construction to rental car services to extreme sports.

Despite the differences, all indemnity agreements should include the following key components:

Although they may differ, most hold harmless agreements will contain the following key elements:

  • Indemnification clause. This is the center of the entire agreement and the most important clause. The indemnification clause states the acts that the business will be indemnified against. This section needs to be unambiguous to be legally binding.
  • Scope. The scope defines the extent of protection the business can claim under the contract.
  • Governing law. Every state has different laws and standards surrounding indemnity agreements. Therefore, the contract should state which state law will govern the agreement.
  • Duration. The duration states how long the rights and obligations of the contract will exist between the parties.

Depending on your business and the covered activity, your indemnity agreement may need additional and more detailed clauses. Your contract lawyer will know what to include to protect you from liability.

What are the Exceptions to an Indemnity Agreement?

Indemnity agreements are crucial tools for businesses that offer services that carry risk. However, a business owner needs to understand that indemnity agreements are not catch-all contracts that completely absolve liability.

The following situations are usually ruled as exceptions to indemnification:

  • The business acts with negligence or gross negligence
  • The business committed a criminal offense
  • The business acted in bad faith or unreasonably
  • The business benefitted from the act or will receive compensation

Exceptions and the enforceability of an indemnity agreement will differ by state and jurisdiction.

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Indemnity Agreement Drafting

Indemnity agreements are important documents, and they must be drafted correctly. A business owner should always hire an experienced attorney for help with an indemnity agreement.

Indemnity agreements are challenging to enforce. For example, suppose the agreement is ambiguous or lacks critical clauses. In that case, the court will often favor the customer who signed the agreement rather than the business looking to be released from responsibility.

An experienced lawyer will know how to draft an unambiguous agreement with detailed terms and conditions. A comprehensive indemnity agreement can differentiate between liability protection and a costly lawsuit.

Indemnity Agreement Review

Indemnity agreement templates can easily be found online, so some business owners may be tempted to draft their agreements. While this is possible, it is always recommended that a business owner has their agreement reviewed by a licensed attorney.

The laws governing indemnity agreements vary by state. A template may not account for your state’s unique laws. When you hire an attorney to review your agreement, they will ensure it is detailed enough, customized to your business practices, and abides by state laws.

Indemnity Agreement Drafting Costs

Hiring an attorney to draft an indemnity agreement will incur legal fees. However, the lawyer will use their time and expertise to provide valuable legal services to their client.

ContractsCounsel’s marketplace data shows the average indemnity agreement drafting costs are $600.00 across all states and industries.

Indemnity Agreement Review Costs

Review services will also incur legal fees. Like drafting services, review services take a licensed attorney's time and legal expertise.

According to ContractsCounsel’s marketplace data, the average indemnity agreement review costs are $550.00 across all states and industries.

How Do Lawyers Charge for Indemnity Agreements?

Hourly Rates for Indemnity Agreements

Contract lawyers specializing in drafting indemnity agreements can charge for their services in a few different ways. First, all types of lawyers commonly use hourly rate fee agreements. Under this fee agreement, the lawyer charges a client for time spent on a project or case using a predetermined hourly rate.

This fee structure ensures that lawyers are paid for all their time spent on a case – even if the case takes longer than expected. Clients benefit from not having to pay for legal services until the end of the project. However, they won’t know the total cost of their legal fees until they receive their bill.

ContractsCounsel’s marketplace data shows the average hourly rate for an indemnity agreement lawyer ranges from $200 - $350 per hour.

Flat Fee Rates for Indemnity Agreements

Lawyers use flat fee rates as another common fee structure, especially when hired for a specific task like drafting an indemnity agreement. When a lawyer uses a flat fee billing structure, they quote their client a single fee for the entire project's cost.

The benefit of a flat fee rate structure is that the client knows the total cost of their legal project before agreeing to hire the attorney. The downside is that many lawyers require flat fee rates to be paid upfront before beginning work.

According to ContractsCounsel’s marketplace data, the average flat fee rate for an indemnity agreement is $575.00.

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