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CIPS Exam L5M2 Topic 4 Question 54 Discussion

Actual exam question for CIPS's L5M2 exam

Question #: 54
Topic #: 4

[All L5M2 Questions]

What is the purpose of an indemnity clause within a contract?

Ato assign risk to each party

Bto ensure both parties are adequately insured if something were to go wrong

Cto transfer risk from one party to another

Dto explain what would happen in the case of a force majeure

Show Suggested Answer

Suggested Answer: C

Indemnity clauses transfer risk from one party to another. It is an arrangement whereby one party promises to compensate the other party for a trigger event. An example of an indemnity clause could be a construction firm is building a new bridge and the project is supposed to be completed by 1st June. An indemnity clause may state that should the bridge not be ready by this date, the construction firm will compensate the buyer by X amount. See p.61 for more information on indemnity.

by Reuben at Mar 21, 2025, 04:00 PM

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Stevie

2 months ago

Indemnity clauses? More like 'I'm-not-gonna-pay-for-that' clauses, am I right? But in all seriousness, C is the way to go.

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Nenita

1 months ago

Yeah, indemnity clauses can be tricky, but C does make sense.

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Cristy

1 months ago

I agree, C is definitely the way to transfer risk.

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Rosalind

1 months ago

D is also crucial to explain what would happen in case of a force majeure.

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Loreen

1 months ago

B is important too, to ensure both parties are adequately insured.

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Vanesa

1 months ago

I think A is more about assigning risk to each party.

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Viola

2 months ago

I agree, C is definitely the way to transfer risk.

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Felice

2 months ago

I agree with C, but option B is also important. You want to make sure both parties are covered if something goes wrong.

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Winifred

2 months ago

I believe it's to ensure both parties are adequately insured if something were to go wrong.

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Brittni

2 months ago

I agree with Anissa, it's about transferring risk from one party to another.

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Nickie

2 months ago

Definitely option C. Indemnity clauses are all about shifting liability away from one party and onto the other.

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Brittni

3 months ago

Option C is the correct answer. The purpose of an indemnity clause is to transfer risk from one party to another.

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Sunny

2 months ago

Actually, it's to ensure both parties are adequately insured if something were to go wrong.

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Elbert

2 months ago

Yes, you're right. It's to assign risk to each party.

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Kirk

2 months ago

I think the purpose of an indemnity clause is to transfer risk from one party to another.

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Anissa

3 months ago

I think it's to assign risk to each party.

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Jesse

3 months ago

What is the purpose of an indemnity clause within a contract?

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