Understanding Indemnification Agreements

Indemnification agreements (or clauses or provisions) are designed to protect one party to a contract if the other party does something that causes legal liability to the first party. The “indemnitee” is not responsible for any liability for harm, damages, or losses sustained as a result of the acts or omissions of the “indemnitor.” Indemnification agreements are common in many businesses, and business owners who are considering selling their rare and collectible motor vehicles would be wise to learn more about these agreements. A few indemnification agreement examples: Suppose the passenger of an involved client is injured. She sues the motorist, but she also sues the employer. “I only drove to that meeting because he asked me,” she says. If there was an indemnification provision in the contract, the motorist’s employer would be responsible to pay the claim as if it were their own. Or suppose that a rare and collectable vehicle buyer comes to purchase a vehicle, and then later discovers it has been in an accident. An indemnification agreement example in the purchase contract can “protect” the seller from liability once the exchange of money and vehicle is complete.

Note: an “indemnification” argument is made by a defendant, when he argues that another person or entity is equally or more responsible for the damages that the plaintiff claims to have suffered than the defendant.

Indemnification Agreement Provisions for Most Contracts

• Sample Indemnification Clause: Seller agrees to indemnify and hold harmless Buyer from any claims relating to the sale of the Vehicle.
• Sample Indemnification Clause: Buyer agrees to indemnify and hold harmless Seller from any claims relating to the sale of the Vehicle.

Why Should You Look at the Potential Liability When Selling Your Rare and Collectable Vehicle?

With much of today’s collectable vehicle sales happening in the digital space, buyers in the market for rare and collectable vehicles have grown accustomed to relying on third-party online sales platforms, and photographic and video presentations offered by motor vehicle sellers. Ensuing issues between the parties related to alleged defects, damage, or fraudulent misrepresentations are inevitable. The good news is there are ways to prevent such disputes or minimize the damage if they arise.

How Do Indemnification Agreements Specifically Benefit the Buyer?

Indemnification clauses are common for many types of contracts. They establish the agreement between the parties as to who will be responsible for paying the associated costs if one incurs a liability. Buyer indemnification clauses are often used to protect the seller from liability to third-parties related to defects, damage, or fraud.

Why an Indemnification Clause or Agreement in Rare and Collectable Vehicle Purchases?

The industry standard is to indemnify the dealer and other relevant parties in a retail sales transaction. Dealers that safeguard themselves in the event of a dispute are better able to stay in business and build their reputation. However, one could suggest that the use of indemnification provisions in vehicle sales is both inconsistent and counterproductive: the buyer has a vested interest in the rare and collectable vehicle retail marketplace; yet the buyer is kept “at arms-length” with regards to liability and what risks they might encounter. On the other hand, for those who purchased their rare and collectable vehicles in the digital space, indemnification clauses may be required by the online sales platform. It is worth emphasizing here that a seller would be wise to fully understand the liability provisions outlined by an online sales platform and how they could impact the outcome should an unfortunate dispute arise.

Real-world Example of Rare and Collectable Vehicle Sales Indemnification Provisions

It’s not uncommon for rare and collectable vehicle online sales platforms and dealers to include indemnification provisions; however, how often are they offered as a matter of course? The auction of a stunning vintage Ferrari or Austin Healey is highly publicized (worldwide, in some cases). Until a winning bid is received, the auction house is likely primarily concerned with the commission and sales price, and how to advertise such a high-end and consequential sale. Yet, once the winning bid is received, it’s in the best interest of the auction house to ensure that all potential risks are accounted for – and indemnification provisions are a part of that risk. Indemnification provisions will protect Oldtimer Center when a vintage Austin Healey is sold at the first RM Sotheby’s Alfred Dunhill Motor Cars auction since the agreement was made.

Resources and Using the Right Form of Indemnification Agreement

For online resources, it’s not unusual for them to gloss over the fine print, so to speak. For an example, refer to this resource. Note that they will lead you to relevant information about indemnification agreements and indemnification examples, but they don’t always address the following recommended items: Where to Find Your Indemnification Provisions for Rare and Collectable Vehicle Purchases and Sales Unless you are prepared to take a lot of time away from your cars, the best way to find help with your vehicle purchase and sale contracts is to consult a lawyer experienced in the purchase and sale of rare and collectable vehicles.