This contract tip is about the claim notice language in an indemnification provision.
The indemnification process kicks off with a notice. The indemnified party notifies the indemnifying party about a covered claim. If the indemnifying party controls the defense, it takes over at this point.
There are two ways to approach the notice language.
1. Covenant (favors the indemnified party) - One option is to write the notice provision as a covenant. It's a simple obligation like most other provisions. If the indemnified party does not provide the required notice, it is a breach. But that breach may not be material and may be subject to cure. A typical covenant would say, "The indemnified party will notify the indemnifying party promptly after receiving notice of the claim."
2. Condition precedent (favors the indemnifying party) - With the second option, we write the notice as a condition precedent. This approach provides that the obligation to defend arises ONLY AFTER the indemnified party provides the notice as required. This provision would say, "If the indemnified party promptly notifies the indemnifying party within three business days after receiving notice of the claim. the indemnifying party shall defend..."
Keep in mind that this kind of language nuance may not always play out this way, especially with a judge or arbitrator who leans toward enforcing the spirit of the indemnification rather than the literal wording of it.
What other advice would you add regarding an indemnification provision's notice of claims language?
