The Delaware Court of Chancery recently analyzed an indemnification clause and performed other contract interpretation in NASDI Holdings v. North American Leasing, C.A. No. 2017-0399-KSJM (Del. Ch. Apr. 8, 2019). The court also rejected the applicability of equitable defenses to strictly legal claims.

The dispute involved the sale of a demolition and site-redevelopment company pursuant to an ownership interest purchase agreement. Under the agreement, the seller plaintiffs were obligated to maintain payment bonds secured by a letter of credit for ongoing construction projects. The purchaser eventually withdrew from one of the projects, and the surety drew more than $20 million on the letter of credit that the seller maintained. The seller demanded indemnification for their losses pursuant to the agreement, and the purchaser refused.

It appears the purchaser did not dispute whether the seller incurred losses, as defined in the purchase agreement. Rather, the purchaser argued the seller's claims for indemnification were barred by the “notice of claim” requirements in the purchase agreement.