Warranties and indemnities are among the most heavily negotiated clauses in commercial contracts – and for good reason. They go to the heart of risk allocation, offering protection when things don’t go to plan. But despite all the back-and-forth, they’re still a common source of confusion, contention, and (unfortunately) litigation.

In this blog, we’re cutting through the clutter. No fluff – just a practical breakdown of how these clauses work, what to watch out for, and how to draft them with confidence.

Why do these clauses even matter?

Think of warranties and indemnities as your contractual safety nets. They’re there to manage uncertainty – like buying a used car and wanting reassurance it won’t fall apart next week.

• Warranties = “Here’s what I’m promising is true right now.”
• Indemnities = “If this specific thing goes wrong, I’ll pick up the tab.”

They sit somewhere between boilerplate and deal-breaking. Ignore them at your peril.

Warranties: what they are (and what they’re not)

A warranty is basically a promise about the state of something at the time of signing. Think: “The software conforms materially with its specification,” or “The company isn’t involved in litigation.”

What you do get:

• The right to claim damages if it turns out not to be true.

What you don’t get:

• The right to terminate the contract (that’s usually a breach of condition).
• A misrepresentation claim – unless the contract explicitly says the warranties are also representations.

Those intros like “warrants, undertakes and represents”? They need more than a flourish. To preserve misrep claims, the contract needs to say the warranties were relied on as representations – otherwise, you’re out of luck.

Drafting tip: Make sure the language reflects what you actually want. “Materially in line with the spec” sounds good until you’re arguing about what “materially” means six months into a dispute.

Indemnities: the business end of risk allocation

If warranties are about the past or present, indemnities are your future-proofing. They answer the question: what if X happens – who pays?

They’re often used to:

• Cover third-party IP claims (super common in tech deals).
• Protect against known tax risks in share purchase agreements.
• Allocate costs if disputes arise after a settlement.

The difference? An indemnity isn’t just a basis for damages – it’s a promise to reimburse. Think of it as a mini-insurance policy tucked inside your contract.

Pro tips for practical drafting

1. Tailor to the risk
2. Don’t dust off a generic clause. Identify what’s unknown, and shape the clause around that.
3. Don’t ignore the process - notification provisions are make-or-break.
   • “Prompt” or “reasonable” notice? Too vague.
   • “Within 21 days of becoming aware”? Now we’re talking.
   • Many warranty claims fall over simply because notice wasn’t given properly.
4. Control the consequences - if you’re the one giving the indemnity:
   • Cap it.
   • Time-limit it.
   • Define exactly what triggers it (and what doesn’t).
   • Consider a clause that lets you take over the defence of third-party claims.
5. Watch out for third-party rights
6. If your indemnity extends to group companies or insurers, check your third-party rights clause. Better still, name them explicitly in the contract or add them as parties.

Real talk: courts and context

Courts aren’t robots. They won’t just read clauses in isolation. They’ll look at the full contract, the commercial context, and what makes business sense. So if you think you’ve written a clever workaround, make sure it doesn’t end up being read as an unenforceable exclusion clause in disguise.

Summary

Warranties and indemnities aren’t just legal garnish – they’re core to managing commercial risk. Nail them, and you save your business time, money, and potential legal headaches.

Want to stress less when the next contract lands on your desk?

• Focus on unknowns.
• Be crystal clear in your drafting.
• Treat these clauses like they matter – because they really do.

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