Legal Term Explainer

An indemnification clause means you agree to cover the other party's legal costs and damages if something goes wrong because of your actions. Example: You're a freelance developer and your code causes a data breach at the client's company. An indemnification clause could make you responsible for their legal fees and settlements — even if the breach was partly their fault. Why it matters: it can expose you to liability far exceeding your contract value. Common misconception: 'If it's mutual, it's fine' — mutual indemnification sounds balanced but can still expose the weaker party to disproportionate risk. Consult a licensed attorney before signing.