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I'm a sole proprietor in the US contracting for a few months to make changes to a mobile app for a medium sized company. They want me to sign this clause under Delaware jurisdiction:

Consultant shall indemnify, fully defend, and hold Company harmless from and against liability, loss, cost, expenses and damages, from any negligent act, omission, or errors of the Consultant that arise from the Consultant's the performance under this Agreement.

The contract is worth about $25K. The worst I can probably do in terms of mistakes is incorporate code or graphics into their product that I don't have a license for, or accidentally delete or leak personal information. It's a news reader app so mistakes are going to be less costly than mistakes for something like a large ecommerce site.

  1. I feel "defend" is unreasonable because it would mean I would have to pay to defend against third party claims with no way to limit the cost of the legal defence or who can try to claim.

  2. I feel there should be a limit to the liability costs that can be claimed. I've signed contracts that say the "limited to the cost paid to the contractor under this agreement" before and feel that is fair.

Is the above clause unusual in this contracting context and overly risky to sign? Are my objections reasonable and asking to remove 1 and include 2 a reasonable solution? Is there some fairer boilerplate clause I can refer to that's closer to this?

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  • As always, you should have an attorney review and explain the contract to you. In the USA the terms indemnify and defend are defined differently state by state. Some see the term indemnify as implicitly incorporating the term defend, while other states see these two terms as wholly different.
    – joeqwerty
    Aug 5 at 3:05

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Actually, what this is asking you to do is to buy Errors and Omissions insurance. This is a common request from companies of a certain size. Your choices are to ask them to waive that requirement in your case or to add the cost of that insurance into your pricing.

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  • Does errors and omissions insurance generally cover the "fully defend" part though? I've seen indemnification clauses before but they don't always have the "defend" part which jumped out at me. Policies generally say they will defend cases against "you" but in this case it would be defending the Company so that wouldn't normally be covered?
    – bellsdid
    Apr 24 at 19:24
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    @bellsdid When shopping for that insurance, you need to make sure that the policy does cover that. Talk to your agent and insist on that clause. Read through the proposed policy and if it doesn't, keep shopping. It might be more expensive insurance, but the client will be paying for it.
    – David R
    Apr 24 at 21:24

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