An indemnity is a contractual promise to pay the buyer for specified losses, regardless of whether a warranty has been breached. Indemnities in Australian M&A are typically given for known or identified risks where the buyer wants certainty of recovery rather than relying on proving warranty breach and damages.
Common indemnities cover specific tax exposures, identified litigation, environmental contamination, or pre-completion compliance issues. Indemnities may sit outside the standard warranty cap and basket structure, depending on negotiation.