CIPS Exam L5M2 Topic 4 Question 54 Discussion

Actual exam question for CIPS's L5M2 exam

Question #: 54
Topic #: 4

[All L5M2 Questions]

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

Show Suggested Answer

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.

by Reuben at Mar 21, 2025, 04:00 PM

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15 days ago

Option C is the correct answer. The purpose of an indemnity clause is to transfer risk from one party to another.

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Elbert

1 days ago

Yes, you're right. It's to assign risk to each party.

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Kirk

3 days ago

I think the purpose of an indemnity clause is to transfer risk from one party to another.

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Anissa

19 days ago

I think it's to assign risk to each party.

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Jesse

26 days ago

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

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