Can a Letter of Indemnity Protect You in a Breach of Contract Claim?

Can a Letter of Indemnity Protect You in a Breach of Contract Claim?

Can a Letter of Indemnity Protect You in a Breach of Contract Claim?

Any person or entity entering any kind of business agreement is choosing to be interdependent. By getting work done together, work is expedited and optimized. Though agreements in theory are designed to make life easier, there are hiccups and speed bumps that can slow down a process or create complications that make the original agreement a hassle and counterintuitive. Worse still, then, is a failed contract — that is, a contract where one party did not fulfill their end of the agreement. Today we explore the relationship between a letter of indemnity and a breach of contract claim.

Why It Is Important To Understand Breach Of Contract

A breach of contract occurs whenever there are mutually agreed upon obligations, and one party fails to perform those agreed-upon obligations. A breach of contract is not necessarily the failure to complete a contract in its entirety, but it also includes contracts that were completed late or not according to the agreement.

It is important to note that a contract involves more than one party. As such, each party has responsibilities to complete. If the party seeking breach of contract damages did not complete their end of a contract, it may work against them and their case, and they may not be awarded the damages they seek. In order for a breach of contract to move forward smoothly, the party making the claim must prove their damages incurred, and that they were in good standing regarding the agreement.


A letter of indemnity is one way a breach of contract’s effects can be mitigated. An indemnity bond, as it is commonly referred to, acts as a form of insurance. It is an agreement whereby certain provisions are guaranteed between both parties. Think of it similarly to another contract, whereby the damages of an original broken contract may be repaired or remedied.

A letter of indemnity can help an underperforming party to repair any damages the other party incurred. Similarly, for the afflicted party, a letter of indemnity ensures that one does not have to bear the brunt of the underperforming party’s mistake. Indemnity bonds, or a letter of indemnity, are a useful tool that can be drafted by a financial advisor or attorney in order to protect a contract from the nature of certain unpredictabilities.


Being on any end of a breached contract can be quite difficult. You either have to deal with the ramifications of a party that failed to perform, or you have a company seeking compensation due to the inability to have fulfilled a contract. While there are certain actions that can be taken to prevent breaches of contracts, when a breach ultimately occurs, there are still just as many legal options to ensure you aren’t suffering the brunt of the event. At King & Jones, our Chicago breach of contract attorneys can help answer any questions you might have regarding breach of contract when you contact our team at 312-372-4142 today.