NASCLA Accredited Commercial General ContractorGeneral RequirementsMedium
A commercial general contractor is negotiating a contract for a new office building. The owner insists on a clause stating that the contractor will be responsible for any damages or losses incurred by the owner due to the contractor's negligence, errors, or omissions, even if the owner is partially at fault. What type of clause is the owner attempting to include?
- AChange Order Clause
- BIndemnification Clause
- CLiquidated Damages Clause
- DForce Majeure Clause
Show answer & explanationAnswer & explanation
Correct answer: B. Indemnification Clause
An indemnification clause shifts risk from one party to another, requiring the indemnifying party (contractor) to compensate the indemnified party (owner) for specified losses or damages, even potentially when the indemnified party is partially at fault, depending on the clause's wording.
Why the other options are wrong
- A. A Change Order Clause addresses modifications to the contract scope or price.
- C. A Liquidated Damages Clause pre-defines compensation for specific breaches, like delayed completion.
- D. A Force Majeure Clause excuses performance for unforeseeable events beyond control.
Indemnification Clause
A contractual provision where one party (the indemnitor) agrees to compensate the other party (the indemnitee) for certain losses or damages.
- Transfers risk and liability.
- Can be broad or narrow in scope.
- Often heavily negotiated in construction contracts.
Memory trick: Indemnify means 'I'll take the fall for you, sometimes.'