What it means
An indemnity is a contractual promise by one party to compensate another for specified losses, liabilities, or costs — often those arising from the conduct of a third party or from a particular risk. It shifts the financial burden of certain events from one party to another. Indemnity clauses are common in commercial contracts, leases, and service agreements. Because they can create wide-ranging liability, courts interpret them carefully and according to their precise wording. A claim under an indemnity can be broader than ordinary damages for breach.
How it's used
The supplier agreed to indemnify the retailer against any claims arising from faulty products it manufactured.