This form provides boilerplate contract clauses that restrict or limit the dollar exposure of any indemnity under the contract agreement. Several different language options are included to suit individual needs and circumstances.
California Indemnity Provisions refer to the contractual clauses that determine the financial liability one party assumes if there is a breach or loss in a business agreement or transaction. These provisions outline the indemnification obligations, including the dollar exposure, associated with various elements such as baskets, caps, and ceilings. Baskets: In indemnity agreements, a basket sets a threshold below which the indemnifying party is not held liable for indemnity claims. Different types of baskets exist, including: 1. DE Minims Basket: This type of basket stipulates a minimum amount of loss or damage that must be reached before indemnification applies. It protects the indemnifying party from minor claims that might not be worth pursuing. 2. Tipping Basket: Here, the indemnifying party is only responsible for claims once the aggregated losses exceed a predetermined threshold. Once the basket tips, the indemnifying party assumes responsibility for all claims. Caps: Caps are limitations on the maximum dollar amount of indemnification that the indemnifying party is liable for in cases of breach or loss. They protect the indemnifying party from exorbitant compensation demands, and three common types are: 1. Deductible Cap: This type of cap specifies a threshold amount below which the indemnified party must incur losses before seeking indemnification. The deductible amount is not covered until exceeded. 2. Individual Cap: An individual cap limits the amount of indemnification available for each specific claim. Any further claims above the cap will not be covered by the indemnifying party. 3. Aggregate Cap: This type of cap sets the maximum liability of the indemnifying party for all claims arising from multiple breaches or losses during a specified period. Once this limit is reached, the indemnifying party is no longer responsible for any additional claims. Ceilings: Ceilings, similar to caps, restrict the upper limit of identifiable losses. However, they usually apply to specific situations or elements of an agreement, like liability claims for environmental damage or intellectual property infringement. To summarize, California Indemnity Provisions — Dollar Exposure of the Indemnity regarding Baskets, Caps, and Ceilings encompasses the financial obligations and limitations related to indemnification in various scenarios. The different types include DE Minims and Tipping Baskets, as well as Deductible, Individual, and Aggregate Caps. Ceilings may also be specified for certain circumstances. Understanding these provisions is crucial for parties involved in business agreements, as they define the extent of financial responsibility in case of breach or loss.
