The indemnification of a business buyer, by the seller of a company against defined risks, usually takes place when a business sale is a stock sale as opposed to an asset sale. In a stock sale, a buyer is accepting certain risks that do not exist when assets (not stock) are being acquired. With stock sales, it is not uncommon for the buyer of the stock to bargain for an indemnification provision that survives the closing of the sales transaction.

An indemnity is a contractual obligation of one party (seller) to compensate the loss incurred by the other party (buyer) due to the acts of the seller.

Indemnification agreements should always be drafted by a business attorney.

Employee vs. Independent Contractor