What best describes an indemnification clause in a contract?

• A. A clause shifting liability where one party compensates the other for specified losses
• B. A clause that governs data access
• C. A clause that determines dispute resolution
• D. A clause that allows price adjustments

Answer: (A)

An indemnification clause is about shifting risk by requiring one party to compensate the other for defined losses or damages that arise from events covered by the contract. It typically means the indemnitor will pay for costs, losses, and even legal defense or settlements related to claims tied to the agreement, including certain third‑party claims. This matches the description that a clause shifts liability where one party compensates the other for specified losses, making it the best choice. It’s not about who can access data, how disputes are resolved, or how prices are adjusted—those describe different kinds of provisions, not the risk‑bearing transfer captured by indemnification.