Got a $200K contract with F500 company. Their MSA has an indemnification clause that basically says I'm liable for any and all damages without limit. My E&O insurance only covers $1M. This seems insane. How do I negotiate this?
Standard enterprise overreach. They send the same MSA to everyone. Almost always negotiable. Common modifications:
1. Cap indemnification at contract value or insurance limits
2. Exclude consequential/indirect damages
3. Make it mutual (they indemnify you too)
4. Limit to third-party claims only
5. Require they give you control of defense
Key things to negotiate:
Carve-outs for IP indemnification: You should only indemnify for claims that your work infringes third-party IP — not for their misuse of deliverables.
Liability cap: "Total aggregate liability under this agreement shall not exceed the greater of (a) amounts paid in the 12 months preceding the claim, or (b) $X."
Carve-out for gross negligence/willful misconduct: Caps shouldn't apply to intentional bad acts.
At $200K, they expect you to push back. Their legal team has seen these requests before.
Word of warning: some F500 procurement teams have zero authority to modify legal terms. Ask early if they can actually negotiate, or if you need to escalate to their legal department. Saves time.
Also: get your own lawyer to redline it. The $2-3K for contract review is nothing compared to the risk on a $200K deal.
Vendor contract sent me an indemnification clause that says I indemnify them for 'any and all claims arising from or related to the services.' That's incredibly broad — it would make me responsible even for their own negligence. Is this standard? Can I push back?
@SmallBizOwner_Tara — Broad indemnification clauses are common in vendor contracts but they're absolutely negotiable. Standard pushback includes: (1) Make it mutual — if they want indemnification from you, you should get it from them. (2) Limit scope to claims arising from the indemnifying party's negligence or willful misconduct, not 'any and all claims.' (3) Add a cap tied to the contract value (e.g., indemnification limited to the fees paid under the agreement). (4) Exclude consequential damages. (5) Require the indemnitee to give prompt notice and cooperate in the defense. Most vendors will accept reasonable modifications if you red-line their template. The ones who won't negotiate are either unreasonable or trying to take advantage.
Coming at this from the buyer side — I manage vendor contracts for a mid-size tech company and negotiate indemnification clauses regularly. Here is what actually happens behind the scenes when you push back:
Our legal team sends the same template MSA to every vendor. The indemnification clause is written to be as broad as possible because that is the starting position. We fully expect vendors to redline it. If a vendor signs it as-is, our legal team actually flags it internally because it suggests the vendor did not review the contract carefully.
What our procurement team will accept without escalating to legal: (1) mutual indemnification, (2) limiting scope to third-party IP claims and data breaches caused by the vendor, (3) a liability cap at 2x the annual contract value or the vendor’s insurance limits. What requires legal approval but is usually granted: carving out consequential damages, requiring prompt written notice before indemnification kicks in, giving the indemnifying party control of defense.
What we will not accept: removing indemnification entirely, capping it below the contract value, or limiting it to direct damages only for IP infringement claims. IP indemnification is non-negotiable for us because our company could face existential risk if a vendor’s deliverables infringe a third-party patent.
My advice: respond with a redline within 5 business days. Do not just say “we have concerns” — mark up the actual language. Procurement teams process dozens of contracts simultaneously and a clean redline gets resolved faster than vague objections.