An indemnity agreement is a legal contract where one party agrees to compensate another for any losses or damages that may occur. This type of agreement is often used in business transactions to protect one party from potential liabilities that could arise from the actions of the other party. For example, if a contractor causes damage while working on a project, the indemnity agreement may require the contractor to cover the costs of repairs. These agreements are common in various industries, including construction and insurance. They help clarify responsibilities and provide financial protection, ensuring that the party at risk is compensated for any unforeseen issues. Understanding the terms of an indemnity agreement is crucial for all parties involved to avoid disputes later on.