California Construction Contract Indemnity Clause: What You Need to Know
When undertaking a construction project in California, it is important to understand the legal requirements that come with it. One of the most important aspects to keep in mind when drafting a construction contract is the indemnity clause.
What is an Indemnity Clause?
According to California law, an indemnity clause is a contractual provision that requires one party to compensate the other party for any losses, damages, or liabilities that may arise from the construction project. Essentially, the indemnity clause shifts the risk of loss from one party to another.
There are two types of indemnity clauses in California: broad form and limited form. A broad form indemnity clause requires one party to indemnify the other for all losses, damages, or liabilities, regardless of fault. On the other hand, a limited form indemnity clause only requires one party to indemnify the other for losses, damages, or liabilities caused by the indemnifying party`s negligence.
The Importance of the Indemnity Clause in California Construction Contracts
Construction projects, by nature, pose a risk of injury, property damage, and other liabilities. Therefore, it is crucial to include an indemnity clause in a construction contract that outlines who carries the risk of loss.
In California, the law states that an indemnity clause that requires one party to indemnify the other for losses caused by the other party`s negligence is unenforceable and against public policy. This means that a limited form indemnity clause is the only valid option for California construction contracts.
However, there are exceptions to this rule. If the indemnity clause involves an “insured contract,” it may still be valid. An insured contract is a contract in which the indemnifying party assumes the liability of the indemnified party and is covered by the indemnifying party`s insurance policy.
Additionally, the indemnity clause must be very specific and clear. Vague, ambiguous, or overly broad language may render the clause unenforceable.
When drafting a construction contract in California, it is essential to include a well-written indemnity clause that outlines who carries the risk of loss. The indemnity clause must be specific and clear, and a limited form indemnity clause is the only valid option in California. Understanding the legal requirements surrounding indemnity clauses can help protect both parties in a construction project and ensure that the project runs smoothly and successfully.