In Michigan, a common clause to see in service and products contracts is one entitled indemnification. Within each indemnity clause are three separate and independent concepts: (1) Indemnify; (2) Hold Harmless; and (3) Defend. Each point conveys certain rights, duties, and obligations to the other party.

For example, a common indemnification clause is similar to:
“Contractor hereby releases and will defend, hold harmless, and indemnify the Company, from and against any allegation or claim based on any loss, arising from any act or omission by Contractor.” Here you see the 3 independent concepts and independent duties.

(3) “Defend” creates a duty to defend (obviously) the Company in a lawsuit, which includes the duty to prepare for and control of the defense. Immediately upon filing and notice of a claim, the Contractor’s duty is triggered. Occasionally it may be wiser to control your own defense, so use this carefully in conjunction with the other clauses.

(2) “Hold Harmless” means that the Company is not liable for the described damages. This essentially means, that the Contractor (the party indemnifying) may not sue the Company (the party being indemnified). Indemnification and hold harmless are closely related ideas and occasionally may mean the same thing (creating a redundancy, but not usually ambiguity).

(1) “Indemnification” means that the Contractor must compensate the Company for losses or damages described within the paragraph. This is independent of other clauses describing damages, such as liquidated damages. This will likely occur after the judgement has been filed against the Company.

Clearly, these clauses direct liability and risk from one party to the other; they should be considered carefully when agreeing to the terms of a contract. Generally, the contract price itself may be heavily dependent upon these clauses. Discuss with your attorney how best to price your fees within a contract containing a clause like the one above.