Discuss CIPS L5M2 Exam Topic 3 Question 70

What is the purpose of an indemnity clause within a contract?

Ato assign risk to each party

Bto ensure both parties are adequately insured if something were to go wrong

Cto transfer risk from one party to another

Dto explain what would happen in the case of a force majeure

Suggested Answer: C

Indemnity clauses transfer risk from one party to another. It is an arrangement whereby one party promises to compensate the other party for a trigger event. An example of an indemnity clause could be a construction firm is building a new bridge and the project is supposed to be completed by 1st June. An indemnity clause may state that should the bridge not be ready by this date, the construction firm will compensate the buyer by X amount. See p.61 for more information on indemnity.

Get Premium L5M2 Questions as Interactive Web-Based Practice Test or PDF Real Exam Format Detailed Explanations Instant Access Get Your Practice Test

25 comments · newest first

Kiera 23 days ago

Definitely A. It’s crucial for contract clarity.

Becky 28 days ago

I like A and C together. They both capture the essence.

Fidelia 1 month ago

D is interesting, but not the main purpose.

Tyisha 1 month ago

I lean towards C. It’s about shifting liability, right?

Gracia 1 month ago

True, but I feel like B is important for insurance coverage.

Roxanne 2 months ago

But isn't it also about transferring risk? Option C seems valid too.

Mollie 2 months ago

I agree, option A makes sense. It clarifies who bears the risk.

Lemuel 2 months ago

I think the indemnity clause is mainly about risk assignment.

Brice 2 months ago

Definitely A. It’s crucial for contract clarity.

Dean 2 months ago

I like A and C together. They both capture the essence.

Tasia 2 months ago

D is interesting, but not the main purpose.

Shawnna 3 months ago

I lean towards C. It’s about shifting liability, right?

Katina 3 months ago

True, but I feel like B is important for insurance coverage.

Carolynn 3 months ago

But isn't it also about transferring risk? Option C seems valid too.

Patria 3 months ago

I agree, option A makes sense. It clarifies who bears the risk.

Lourdes 3 months ago

I think the indemnity clause is mainly about risk assignment.

Susana 4 months ago

Surprised there's so much to it!

Lamonica 4 months ago

I thought it was just for insurance purposes, like option B.

Margarita 4 months ago

Wait, isn't it more about transferring risk?

Georgeanna 4 months ago

Totally agree, option A is spot on!

Minna 4 months ago

It's mainly about assigning risk to each party.

Anglea 4 months ago

I recall a practice question that mentioned indemnity clauses in the context of liability, which makes me think it’s definitely related to risk transfer, so C seems plausible.

Mignon 6 months ago

I’m not entirely sure, but I feel like indemnity clauses are more about protecting against losses rather than just insurance, so maybe it’s not B.

Felicitas 6 months ago

I remember discussing how indemnity clauses can transfer risk, which makes me think option C could be correct too.

Latrice 6 months ago

I think the indemnity clause is mainly about assigning risk, so I might lean towards option A.

CIPS L5M2 Exam - Topic 3 Question 70 Discussion