Mutual indemnity clause: both sides cover the same risks

Sample clause

a six month co marketing arrangement between Ferro Strength and Lumen Pilates, two independent studios sharing a joint membership offer and each promoting it to its own list

9. Mutual indemnity 9.1 Each party (the Indemnifying Party) indemnifies the other party (the Indemnified Party) against any loss, damage, cost or expense the Indemnified Party incurs arising from a third party claim that content or materials the Indemnifying Party supplied for the Campaign infringe that third party's intellectual property rights. 9.2 Each party indemnifies the other against a third party claim for personal injury or property damage caused by an act or omission of that party or its personnel at a Campaign event. 9.3 An indemnity under this clause is reduced proportionately to the extent the loss was caused by the Indemnified Party. 9.4 The Indemnified Party must notify the Indemnifying Party of a claim within ten (10) business days of becoming aware of it, must not admit liability or settle without written consent, and must give reasonable assistance with the defence. 9.5 Each party's total liability under this clause is limited to two hundred thousand dollars ($200,000) in aggregate over the Term.

Sample wording, not legal advice.

Variants

What to negotiate

• Whether symmetry is real

  Identical wording produces an unequal clause when only one party supplies content, or only one party hosts events. The useful test is to read each limb and ask which party will actually trigger it. Where the answer is always the same party, the fix is different heads for each side rather than the same sentence twice.

• Matching caps to capacity

  A small business promising the same figure as a large one is promising something it cannot pay, which helps nobody. Different caps for each side, explained in the clause as reflecting scale and insurance rather than fault, are more honest and are usually accepted once the reason is written down.

• Knock for knock and its limits

  Knock for knock is efficient because it removes the fault inquiry entirely, and it only works where both parties carry insurance for what they have assumed. Without matching cover and a waiver of subrogation, the clause simply moves an uninsured loss to whichever party had the accident.

The risk of leaving it out

Without a mutual indemnity in a shared activity, a third party claim lands wherever the claimant chooses to point, and the two parties then argue about contribution while the claim runs. In a joint campaign or a shared event that argument usually costs more than the claim itself, and it damages the relationship the arrangement was built to create.

When mutual wording is the right shape

Mutual indemnities suit arrangements where both parties contribute the same kinds of things: content in a co marketing campaign, staff and equipment at a shared site, data in a joint research project. They suit a supply relationship far less well, because a customer buying a service is not bringing an equivalent exposure and a mutual clause there is usually a negotiating gesture rather than a real allocation. The question to ask is whether each party can name a plausible event under which it would pay. If only one can, the clause is one way wearing a mutual label.

Common mistakes

The same words are used for both parties when only one supplies the content that could infringe. Caps are equal in a relationship that is not. Notice and defence mechanics appear only once, drafted from the perspective of a single indemnified party, so the reciprocal direction has no process. And the interaction with insurance is left out, which matters most in a knock for knock clause where the whole structure assumes cover exists.

Where it sits in a generated document

In a collaboration agreement the mutual indemnity sits after the obligations of each party, so the reader already knows what each side is bringing. A generated memorandum or partnership document numbers the clause and gives each limb its own sub number, which is what lets a later notice quote the right one. Each party in the signature block becomes one signer, with a name, an email and a position in the signing order.

Documents that carry this clause

Partnership agreement templateThree physiotherapists have run one Newcastle practice together since 2024 without anything in writing. This agreement records what the handshake never covered: uneven capital sitting beside uneven hours, the six decisions no partner can make alone, and what a leaving partner is owed.Memorandum of understanding template that says which clauses bindAn MOU is useful because it is not a contract, and dangerous when nobody says which parts are. This one records a collaboration between a library service and a men's shed in plain words, puts each side's contribution in a table, and marks the three clauses that legally bind, where a letter of intent or a mutual NDA would bind by design.Sponsorship agreement template that lists every benefit with a numberSponsorship falls apart in the delivery, when nobody can find the email that said how many banners and which stage. This agreement is the benefits list as a table with quantities and dates, the $18,000 fee in instalments tied to those dates, and the two clauses sponsors care about most: exclusivity, and what happens if the event does not go ahead.

Questions people ask