Deed Of Indemnity: Sample, Key Clauses And When To Use It In Australia

If you run a business, you’ll eventually be asked for an indemnity - or you might need to give one to someone else. It can come up when appointing a director, engaging a contractor, entering a lease, supplying goods, or working with another business on a project.

That’s where a deed of indemnity often comes in. It’s a legal document that sets out who will cover certain losses, costs or liabilities if things go wrong.

And if you’re looking for a deed of indemnity sample, you’re probably trying to work out what it should look like, what clauses are “standard”, and what you should be careful about before you sign anything.

In this guide, we’ll walk you through what a deed of indemnity is (in plain English), when Australian businesses use one, the key clauses to look for, and how to tailor a deed of indemnity template to your actual risk (rather than relying on a generic document that might not protect you properly).

What Is A Deed Of Indemnity (And Why Use A Deed Instead Of A Contract)?

An indemnity is essentially a promise by one party to cover certain losses, damage, liabilities, or costs suffered by another party.

A deed of indemnity is the document that records that promise, but with an important twist: it’s executed as a deed, not a standard contract.

From a business perspective, deeds are commonly used when you want the indemnity to be:

• More formal and clearly intended to be legally binding (especially where the risk is significant);
• Enforceable even without “consideration” (in simple terms: even if there isn’t a clear “exchange” like money paid for a promise, which is usually required for contracts); and
• Clear and standalone, so everyone understands exactly what liabilities are being allocated.

In practice, you’ll see deeds of indemnity used where a person or entity is taking on risk for the benefit of your business - or where your business is being asked to take on risk for someone else.

If you’re already putting in place broader documents (like a customer agreement or supplier contract), you might build an indemnity clause into that agreement instead of having a standalone deed. But a standalone deed is common where the indemnity needs to survive independently, or where it relates to an office-holder role like a director.

When Do Australian Businesses Use A Deed Of Indemnity?

A deed of indemnity can be used in lots of situations, but small businesses most often see them in a few recurring scenarios.

Director And Officer Protection

Companies often give directors and officers an indemnity to cover certain liabilities or legal costs they might incur while acting for the company (subject to what’s allowed under Australian law and the company’s constitution).

This is usually part of a broader governance setup, alongside documents like a Company Constitution.

Contractor, Consultant Or Service Provider Arrangements

If you engage contractors (or you provide services as a contractor), indemnities often show up around:

• negligence (e.g. faulty work, property damage, safety issues);
• intellectual property infringement (e.g. using unlicensed images, code or designs);
• confidentiality breaches; and
• third-party claims linked to the services.

Sometimes these are included in a broader services agreement, and other times the other party asks for a standalone deed because they want extra certainty.

Leases, Licences And Access To Property

Landlords, venue operators, or owners of commercial premises sometimes ask for indemnities around property damage, personal injury claims, or your conduct while on-site (especially for fit-outs, events, pop-ups, and shared spaces).

Business Collaborations And Joint Projects

If you’re collaborating with another business - for example, doing a co-branded campaign, bundling products, or running a joint event - an indemnity can help allocate risk between you. One party may indemnify the other for their own conduct, staff, products, or representations.

One-Off Risk Events (Where Insurance Isn’t Enough)

Sometimes an indemnity is used where a party wants comfort beyond insurance (or where insurance doesn’t clearly respond). For example, if one party is relying heavily on the other’s information or work product, an indemnity might be part of the deal.

It’s important to remember: an indemnity does not replace insurance, and it doesn’t guarantee you’ll recover money if the indemnifying party can’t pay. But it can be a strong legal tool when structured properly.

What Should A Deed Of Indemnity Sample Include? Key Clauses Explained

A good deed of indemnity sample isn’t just a page that says “Party A indemnifies Party B”. The clauses matter, because indemnities can shift a large amount of risk (sometimes more than people expect).

Below are the clauses we commonly see in Australian deeds of indemnity, and why they matter to you as a business owner.

1. Parties And Definitions (Get The Basics Right)

This sounds simple, but mistakes here can cause real problems later. A deed should clearly identify:

• the correct legal entity (company name and ACN, or individual name);
• each party’s address; and
• defined terms (e.g. what counts as “Loss”, “Claim”, “Liability”, “Services”, “Breach”, “Third Party”).

Definitions are where many deed of indemnity templates quietly expand your obligations. For example, “Loss” might include indirect losses, reputational damage, or internal management time - which can dramatically increase your exposure.

2. The Indemnity Grant (What Exactly Is Being Covered?)

This is the core clause: it describes the promise to indemnify.

Key questions to ask when reviewing this clause:

• What triggers the indemnity? Is it limited to your breach of the deed, your negligence, or something broader like “any act or omission”?
• Who can make claims? Just the other party, or also their employees, related entities, customers, agents, and so on?
• What losses are covered? Legal costs, settlement payments, fines, damages, third-party claims?
• Is it a fault-based indemnity? (e.g. “to the extent caused by your negligence”) or a strict indemnity (e.g. “arising out of” your services, even if you weren’t at fault)?

For small businesses, this is where the risk usually sits. Broad indemnities can effectively make you the insurer for the other party.

3. Exclusions And Limitations (Where The Real Negotiation Happens)

If you’re relying on a generic deed of indemnity template, it may be written to protect the party receiving the indemnity, not you. That’s why limitations are crucial.

Common limitation mechanisms include:

• Caps on liability (e.g. capped at fees paid under the project);
• Exclusion of consequential loss (where appropriate and enforceable);
• Time limits (e.g. claims must be brought within X years);
• Proportionate liability wording (indemnity applies only “to the extent” you caused the loss); and
• Carve-outs where the indemnity doesn’t apply (e.g. where the other party contributed to the loss, or failed to follow your instructions).

These limitations should align with what you can realistically control in the relationship.

4. Third-Party Claims Process (How Claims Are Managed)

Many disputes happen because the indemnifying party is presented with a bill after the fact - without having had any control over how the claim was handled.

A well-drafted deed often includes a process that covers:

• notice requirements (the indemnified party must notify you promptly of a claim);
• conduct of defence (who controls the defence or negotiations);
• approval of settlements (settlements may require your consent if you’re paying); and
• cooperation obligations (each party must cooperate and share information).

This is one of the most practical parts of a deed - it can reduce cost blowouts and prevent surprises.

5. Legal Costs (Including “On A Full Indemnity Basis”)

Deeds often specify that legal costs are payable “on a full indemnity basis”, which can mean the indemnifying party pays legal costs more broadly than in typical court costs orders.

As a business owner, you’ll want to check:

• when legal costs are covered (upon demand? after court findings?);
• whether internal costs are included; and
• whether there are any reasonableness requirements.

6. Insurance Obligations (If The Deed Requires It)

It’s common for the indemnifying party to be required to hold insurance (like public liability, professional indemnity, or product liability) and provide certificates of currency.

If you’re agreeing to insurance obligations, make sure they:

• match the actual risks you’re taking on;
• are commercially realistic for your business size; and
• don’t require types of insurance you cannot obtain or afford.

7. Confidentiality And Privacy (Often Overlooked)

Indemnities frequently tie into confidentiality obligations, particularly if you’ll access sensitive information (customer data, pricing, trade secrets, internal systems).

If personal information is involved (even in a B2B setting), it’s worth checking your privacy settings and customer-facing documents, including your Privacy Policy.

Even if the deed itself doesn’t mention privacy, the way you handle information can be the source of the claim.

8. Execution, Governing Law And “Deed” Formalities

Because it’s a deed, it needs to be executed correctly. In practice, the signing requirements can depend on who is signing (for example, an individual, a company, or a trustee) and how the deed is structured.

For companies, deeds are often executed under section 127 of the Corporations Act (for example, by two directors, or a director and company secretary), but companies can also execute documents through other methods in some circumstances - so it’s worth checking what applies to your situation.

If your business is signing important documents regularly, it’s also worth understanding proper execution and authority (especially if someone signs “on behalf of” someone else). The practicalities are often addressed in documents and processes like p.p. signatures.

The deed should also specify:

• which state or territory law governs it; and
• how disputes are handled (courts, arbitration, negotiation steps).

How To Tailor A Deed Of Indemnity Template To Your Business (Without Overcommitting)

Using a deed of indemnity template can be a starting point, but it’s rarely safe to sign a “one size fits all” version without tailoring.

Here’s a practical way to tailor an indemnity so it reflects the actual relationship and risk profile of your business.

Step 1: Identify The Real Risk You’re Trying To Manage

Ask yourself: what event are we actually worried about?

• If you’re engaging a contractor, is it defective work, IP infringement, workplace incidents, or missed deadlines?
• If you’re giving an indemnity to a customer, is it because they’re relying on your services, or because they want protection from third-party claims?
• If it’s a director indemnity, is it legal costs, regulatory investigations, or claims from shareholders?

If you can’t answer this clearly, the indemnity is likely too broad (or might not cover the right thing).

Step 2: Align The Indemnity With The Underlying Agreement

Indemnities often sit alongside other documents, such as a service agreement, supply agreement, lease, or employment documentation.

If you’re hiring staff, you’ll typically want your Employment Contract and workplace policies to clearly set expectations and responsibilities, rather than relying on a broad indemnity to “fix” operational risks after the fact.

The deed should not contradict your main agreement. If it does, you can end up with uncertainty about which document applies.

Step 3: Narrow The Trigger Events

One of the simplest ways to tailor an indemnity is to narrow what triggers it. For example:

• “to the extent caused by the indemnifying party’s negligence” (narrower);
• instead of “arising out of the services” (broader);
• or “for breach of confidentiality obligations under clause X”.

This ensures you’re not taking responsibility for events outside your control.

Step 4: Add Practical Limits (Cap, Time, Control Of Defence)

For many small businesses, the biggest issue isn’t whether an indemnity exists - it’s that it is unlimited.

Consider whether you need:

• a liability cap that aligns with the value of the deal;
• clear notice and claim handling procedures; and
• the ability to control defence and settlement if you’re paying.

These aren’t just “legal tweaks”. They can be the difference between a manageable business dispute and an existential risk.

Step 5: Check Your Cash Flow And Enforcement Reality

An indemnity is only as useful as the other party’s ability to pay. If you’re relying on a counterparty indemnity, consider:

• are they a company with assets, or a small entity likely to close down?
• is there insurance backing it?
• do you need security (like a bank guarantee) instead?

This is where good contracting meets practical business risk management.

Common Mistakes With Deed Of Indemnity Samples (And How To Avoid Them)

When business owners search for a deed of indemnity sample, the goal is usually speed and simplicity. That makes sense - but it’s also how people sign documents that expose them to unexpected risk.

Here are some common pitfalls we see.

Signing A Broad Indemnity Without Understanding The Scope

Phrases like “arising out of” and “in connection with” can be extremely broad.

If the indemnity covers “all losses” connected to your services, it may extend well beyond what you think you’re agreeing to.

Assuming The Indemnity Is Mutual (When It Isn’t)

Some deeds are one-way: you indemnify them, but they don’t indemnify you. That might be appropriate in certain situations, but you should be aware of it and price the risk accordingly.

Not Aligning The Indemnity With Australian Consumer Law

If you supply goods or services to customers, you can’t contract out of certain obligations under the Australian Consumer Law (ACL). If you’re drafting customer-facing terms, it’s worth ensuring your broader commercial approach matches your consumer law obligations (including warranties and refund expectations). The principles discussed in Australian consumer warranties often come up in disputes, including around who bears the cost when something goes wrong.

For example, if your agreements are inconsistent with the ACL, you could face enforcement risk and customer complaints regardless of what the indemnity says.

Using An Indemnity As A Substitute For Proper Contracts

Indemnities are not a substitute for having strong underlying contracts. In many cases, the right approach is to start with a well-structured services or supply agreement and then include an indemnity clause that is proportionate.

Depending on what you’re doing, the better “foundation documents” might include:

• clear scope of services and deliverables;
• payment terms;
• limitations of liability;
• confidentiality and IP ownership; and
• termination rights.

Not Getting Execution Right

If a deed isn’t executed properly, enforceability can become an issue. This matters especially when things go wrong and you need to rely on the indemnity.

It’s worth having a consistent signing process across your business (particularly if you have multiple directors or managers signing documents).

Key Takeaways

• A deed of indemnity is a formal promise that one party will cover certain losses or liabilities suffered by another, and it’s often used where risk allocation needs to be very clear.
• A deed of indemnity sample should include more than the indemnity clause itself - definitions, exclusions, claims handling processes, and execution clauses are all critical.
• Common business scenarios include director and officer protection, contractor engagements, property access, and collaborations where one party is exposed to third-party claims.
• Generic deed of indemnity templates can be risky if they’re not tailored to the actual deal, especially if the indemnity is broad, uncapped, or not limited to your fault.
• Good tailoring usually means narrowing trigger events, adding caps/time limits, setting claim management rules, and aligning the deed with your underlying agreements and compliance obligations.

If you’d like help reviewing or tailoring a deed of indemnity for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.