How to find them, what they cost, and the equitable language to negotiate in their place.
What follows is a guide to negotiating better indemnity language in your agreements, and about where to look for hidden indemnity exposure. Indemnity is an area where many states have effective limitations on the degree to which indemnity can be invoked, and most states have some form of legal protection against overly aggressive indemnification language.
That could be taken to mean that subcontractors and suppliers don’t really need to worry about negotiating better indemnification terms, because the courts will protect them. We think that is a risky approach, for two reasons.
For those reasons, FairBuild’s entire philosophy on contracts is to always seek what’s equitable. That’s what’s fair, and that standard doesn’t rely on the courts to intervene to protect your interests. What follows is guidance that will protect you from predatory indemnification because it’s fair and balanced for both parties.
This is one of six papers, each covering a different place indemnity risk can be hidden in a typical subcontract. Most subs and suppliers read the section titled “Indemnification” and if they get improvements to that, they assume the risk is covered. But overbroad indemnity risk can show up in at least five other places, and this paper covers one of the most overlooked places for that risk to hide: the Warranty section.
This paper covers the Warranty section, where an ordinary repair-or-replace promise can quietly turn into a defend-and-indemnify obligation.
The other papers in this series cover the Indemnification section itself, the Insurance section, the Flow-Down section, the Default and Termination section, and the Patent and Intellectual Property section.
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Usually in the middle third of the contract, under “Warranty,” “Warranties,” or “Subcontractor’s Warranty.” The section is often short, which is part of what makes it dangerous. Subs read it quickly, assume it covers standard repair-or-replace, and miss the indemnity language hiding inside it.
“Subcontractor shall, at its own expense, defend, indemnify, and hold harmless Contractor and Owner from any claims arising from defects in materials or workmanship for a period of [X years] following Substantial Completion, regardless of whether such defects are discovered during the warranty period or thereafter.”
A standard warranty is a repair-or-replace obligation: if your work is defective during the warranty period, you fix or replace it at your cost. That obligation is limited, manageable, and consistent with what most subcontractors expect when they sign.
The language above isn’t that. It’s defend-and-indemnify, which is a different obligation entirely. Under defend-and-indemnify, if a third party brings a claim against the GC or Owner alleging your defective work caused them harm, you’re responsible for the whole defense, attorneys’ fees included, plus any judgment or settlement. Even a moderately complex construction defect case can produce substantial defense costs before the merits are even considered.
Then there’s “or thereafter.” That phrase extends your indemnity obligation past the warranty period itself. A defect discovered in year five will be in the courts for a while, and then could trigger an indemnity claim in year nine. Nine years later and you’re still on the hook.
Warranty-triggered indemnity claims often come at you long after the project is done, which means they hit your business at the worst possible time. The project is out of your active book, the workers who performed it may not be around anymore, and defending the claim is logistically expensive.
“Subcontractor warrants its Work against defects in materials and workmanship for a period of one year following Substantial Completion of Subcontractor’s Work. During the Warranty Period, Subcontractor shall, at its own expense, repair or replace any defective work upon written notice from Contractor. Subcontractor’s obligations under this section shall not extend to defects caused by (a) normal wear and tear, (b) misuse, abuse, or improper maintenance, (c) modifications or repairs made by others, or (d) materials or designs specified by Contractor or Owner. Claims not asserted in writing within the Warranty Period are waived.”
Three things are improved by this language. It converts the obligation from “defend, indemnify, and hold harmless” back to “repair or replace.” It adds standard carve-outs for damages outside your control. And it puts a hard deadline on the claim window, so a defect surfacing years later doesn’t reach back to you indefinitely.
The big move is the change from defend-and-indemnify to repair-or-replace. A one-year warranty running from substantial completion of your scope, not substantial completion of the entire project, is industry standard for most specialty trades and reasonable for most jobs. That distinction matters. If the warranty runs from completion of the whole project, your clock doesn’t start until long after your work is done.
If the contract calls for longer warranty periods on specific items or systems, which is common for roofing, waterproofing, or mechanical equipment, structure those separately with clear definitions of what’s covered. A blanket multi-year defend-and-indemnify warranty across your entire scope is the version to push back on.
NOTE: FairBuild doesn’t provide legal advice. This paper is designed to help you review and understand agreements from general contractors. For specific legal questions about your contracts, talk to a construction attorney in your jurisdiction.
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