Indemnite
In short
An indemnity is a contractual promise where one party agrees to pay for any losses or damages suffered by another party.
In plain words
It is a legal way to shift risk from one person to another. If something goes wrong and costs money, the person providing the indemnity pays the bill to make things right.
A simple example
A landlord asks a tenant to sign an indemnity clause. If the tenant accidentally breaks a window, the tenant must pay for the repair so the landlord does not lose money.
Why it matters
It provides financial security and certainty in business deals. It ensures that the person who is not at fault does not have to pay for someone else's mistakes or accidents.
Easy to mix up
Do not confuse it with a guarantee, which is a promise to step in only if a third party fails to do something.