When negotiating a saas terms of service (representing the vendor of course), I am often trying to explain to my client the difference between an indemnity and a breach of contract claim. I have been noodling on this for years, trying to figure out a simple way of explaining probably the most complex contractual legal concept that exists.
So here goes (shortcut: it is all about the $). The key differences are as follows:
INDEMNITY: (1) the VENDOR must spend $ to defend the CUSTOMER (or vendor will incur liability under the indemnity), even before it is proven that the vendor is at fault, and (2) the VENDOR has very few defenses to a claim.
BREACH OF CONTRACT: (1) the CUSTOMER must spend $ to sue the VENDOR, (2) the CUSTOMER has the burden of proof, and (3) the VENDOR has several strong defenses to any claim.
Which one would you want if you were the customer?
Related Reading on SaaS Agreements
- SaaS Indemnity: What Types of Insurance Should a SaaS Company Purchase?
- Why You Need a Disclaimer In Your SaaS Agreement
- What Does Your SaaS Agreement Liability Model Look Like?
- Indemnities: 4 Things You Should Know
- SaaS Contract Negotiations Are Not All About the Software
- SaaS Agreement vs. Software EULA: Which Template Do I Need?
- Contract or Policy: Which One Does a Software Company Need?
Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after a review of all relevant facts and applicable law.