A circular indemnity clause is a provision in a contract that protects a carrier from claims made by the cargo owner against the carrier's agents, employees, and subcontractors. Under this clause, the cargo owner agrees not to hold these parties liable for any claims related to the cargo. Instead, if such claims arise, the cargo owner must indemnify the carrier, covering any resulting costs or damages.
This clause is commonly used in shipping and logistics contracts. It serves to limit the liability of carriers and their affiliates, ensuring that the cargo owner cannot pursue claims against them for issues such as loss or damage to goods. Understanding this clause is essential for parties involved in the transportation of goods, as it outlines the responsibilities and protections of each party.
Here are a couple of examples of abatement:
Example 1: A shipping company has a circular indemnity clause in its contract with a cargo owner. If the cargo is damaged during transport, the cargo owner cannot sue the shipping company's employees but must instead cover any costs incurred by the shipping company in defending against such claims.
Example 2: A cargo owner files a claim against a terminal operator for damage to their goods. Under the circular indemnity clause, the cargo owner must indemnify the carrier for any legal fees or damages that arise from this claim. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Key Differences |
|---|---|
| California | Generally enforces indemnity clauses but may require specific language to ensure enforceability. |
| New York | Allows circular indemnity clauses but may scrutinize them for fairness and clarity. |
| Texas | Recognizes indemnity clauses but has specific statutes that govern their enforceability. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Circular indemnity clause | A clause preventing claims against certain parties and requiring indemnification. | Focuses on protecting carriers and their affiliates. |
| Indemnity clause | A broader term that allows one party to protect another from claims. | May not specifically limit claims to agents or subcontractors. |
| Hold harmless clause | A provision that protects one party from legal liability. | Does not necessarily involve indemnification; focuses on liability protection. |
If you are a cargo owner or a carrier, it's important to understand the implications of a circular indemnity clause in your contracts. Review your agreements carefully to ensure that the clause is clearly defined and meets your needs. If you're unsure about how to draft or interpret these clauses, consider using US Legal Forms' templates for guidance. For complex situations, consulting a legal professional may be necessary.
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Its purpose is to protect carriers from claims made by cargo owners against their agents or subcontractors.