According to Black`s Law Dictionary (10th edition of 2014), compensation is an “obligation to obtain losses, damages or liabilities from someone else.” In essence, compensation is a promise to reimburse a person for damage suffered by that person. The obligation to compensate is often limited to the rights of third parties. In addition, there is generally a “defence component” of compensation that requires the party to compensate to take over the defence of the right on behalf of the compensated party. Agreement Title: ISS Commercial Resupply Services-Supply Agreement Type: Supply Agreement Parties: CODE FACILITY CODE Orbital Sciences Corporation | NASA-Johnson Space Center Financial Management Document Date: 03/02/2009 A clause in the contract might look like the following paragraph below. If you see a standard compensation clause, you must always ensure that compensation is reformulated to limit the responsibilities you are prepared to assume. The clause shows how to limit compensation: there are some of the common issues of compensation found in delivery contracts: in addition to taking careful account of the extent of the compensation obligations themselves, it is also important that compensation procedures be addressed: compensation is general commitments that you give to the other party to compensate for losses or damages. Alternatively, the other party can award you compensation. If you get a commercial contract with a compensation clause, you should understand that the food industry is facing a deluge of complaints, both for false labelling and safety violation. In response to these attacks, food companies have increasingly sought to limit their risks by passing it on to their bullackers and suppliers through compensation clauses. Unsurprisingly, the police and subcontractors are backing down. Often, without the assistance of experienced counsel, the parties negotiate and process these compensation clauses in such a way that the resulting provision is confusing, ambiguous and difficult to enforce. This article explains the fundamental principles of the compensation provisions and explains how the parties can structure a balanced and clear provision, which is valuable to both parties.
Basic Principles In delivery contracts, compensation clauses determine the degree of liability of each party and the extent to which each party assumes or moves the risk. The language in the compensation rules can be confusing. The terms “compensate,” “maintain compensation” and “defend” are often used interchangeably, but in fact have different meanings: compensation. Compensation is a contractual obligation of one party (the beneficiary of the exemption) to pay or compensate for the losses, damages or liabilities of another party (the free kick). Stay harmless. In some states, this concept exempts the right to exemption from liability solely to the exempt giver, not to third parties. defend. In many countries, the obligation to compensate occurs only after fair value, when the free exemption judge has rendered a judgment for damages against him or has made payments or suffered actual harm, unless the contract requires such a defence.