The Practical Catches Up with the Theoretical: The Current Status of Texas Indemnity Law

The Practical Catches Up with the Theoretical: The Current Status of Texas Indemnity Law

Today most Texas practitioners understand the need to expressly set out the types of negligence they wish to receive or give indemnity upon to an indemnitee. They also understand, and most generally comply with the requirement for conspicuousness. However, indemnity clauses continue to be traps for the unwary drafter.

Mr. Fox writes: It has now been over twenty years since the Texas Supreme Court adopted the Fair Notice Doctrine for determining whether the parties to an indemnity contract intend to absolve the indemnitee from the consequences of the indemnitee's own negligence. This landmark decision was in Ethyl Corp. v. Daniel Constr. Co., in which the Texas Supreme Court overruled a series of cases by holding that "[p]arties seeking to indemnify indemnitee from consequences of its own negligence must express that intent in specific terms within four corners of contract." In 1993, the Texas Supreme Court further refined the "Fair Notice" requirement by adding a requisite that the indemnity must also be "Conspicuous" Dresser Industries, Inc. v. Page Petroleum, Inc.

Since that decision contract drafters have struggled with what has come to be known as the 'Fair Notice Doctrine" that is comprised of the Express Negligence Test and what is now known as the "Conspicuousness Prong." However, practitioners have now caught up with the theory as laid out by the Texas Supreme Court in Ethyl Corp. and Dresser Industries.

This article will review the basic requirements, under Texas law, to meet the standards of the Fair Notice Doctrine and the Conspicuous Prong; identify some of the current pitfalls in which drafters may find themselves; and discuss a new line of cases which might seem to indicate that the Fair Notice Doctrine requirements of express negligence and conspicuousness around indemnities found in Texas through the Fair Notice Doctrine may be changing. Lastly this article will give the practitioner some practical drafting suggestions around indemnities. [footnotes omitted]

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