Indemnity is one party's promise to protect another party from loss. This is the first of two articles that will analyze key indemnity issues as they relate to IT contracts.

When negotiating a contract, the parties must agree upon which events will trigger the seller's obligation to indemnify. The buyer may initially prefer that the seller indemnify against all losses arising from any seller act or omission. But this approach, even if achievable, may require a significant outlay of the buyer's negotiating capital and can make the seller more cautious when it comes to negotiating other aspects of the indemnity or related liability-allocating provisions of the contract.

Circumstances may require the buyer to develop a list of specific triggers for indemnity. Developing such a list requires careful consideration of the ways in which the seller's products, services, and actions expose the buyer to risk. The list will vary from transaction to transaction, and the buyer should avoid over-reliance on forms and prior agreements as it approaches each agreement.