Corporate & Securities Law

?Indemnitor? and ?Indemnitee?

By Ken Adams

In an exchange of emails this evening, my correspondent inadvertently used “indemnitor” when he meant “indemnitee.”

It’s in order to avoid just such confusion that I recommend in MSCD 1.72 that you not use as defined terms for party names any paired defined terms that differ only in their final syllable, such as Mortgagor and Mortgagee.

Given that one uses Indemnitor and Indemnitee when a contract provides that either party could be subject to claims for indemnification, you can’t replace them with the standard alternatives for party-name defined terms. But what to use instead? Indemnifying Party would be fine, but Indemnified Party would be awkward, in that it’s standard to provide that not only is a given party entitled to indemnification but also its affiliates, and representatives of that party and each affiliate, and so on. Describing each member of that broader group as a “Party” would be to invite confusion.

So how about Indemnifying Party and Indemnified Person?

Out of the material contracts filed over the past six months on the SEC’s EDGAR system, Indemnitor was used in only 378 contracts, Indemnitee was used in 1,669 contracts, Indemnifying Party was used in 1,614 contracts, Indemnified Person was used in 686 contracts, and Indemnifying Party and Indemnified Person were used together in 207 contracts. From that I make the following observations:

• The flight from Indemnitor has begun.
• Indemnitee occurs more frequently than Indemnitor because even when only one party has indemnification obligations, those obligations will often run to a broader group than just the other party.
• Used separately, Indemnifying Party and Indemnified Person are mainstream choices. 
• Indemnifying Party and Indemnified Person are used together often enough to make this a safe pairing.

What say you?

Full post as published by AdamsDrafting on December 04, 2008 (boomark / email).