What is an Affidavit?
An affidavit is an important tool to ensure that the intent of the signer, or "affiant," is properly recognized and followed by a court or governmental body. An affidavit is defined as a written statement or document that is voluntarily signed on the basis of personal knowledge by the affiant and includes the element of legal intention. In simple terms, it is a sworn statement made by an affiant under oath and generally considered to be voluntary, confirming that he or she is of sound mind, free of coercion, understands the content of the statement, and is signing the affidavit willingly.
Affidavits are used in many situations, including:
• A witness may provide an affidavit to provide testimony to be used during trial.
• A land surveyor may provide sworn testimony regarding property lines.
• An affiant whom has witnessed an event may provide an affidavit regarding damages or injuries.
• A party may oppose or support an offer of bail by providing a sworn statement.
• A party may provide an affidavit in support of an insurance claim , confirming the contractor’s estimate for damages and completion of the work.
• A party may provide an affidavit requesting a judgment by default against another party who has not filed a defense to the action within a specified period.
Affidavits may be required for matters such as the following:
• Divorce and adoption proceedings
• Child custody issues
• Domestic restraining orders or injunctions
• Property devastation and insurance claims
• Tax matters
• Business formation
• Discovery requests
Affidavits are important tools to support the validity of claims offered by a party to a governmental body or a court in order to protect the affiant’s interests.
Defining Indemnity Agreements
An indemnity agreement is one that normally requires a party to pay for the cost of damages or losses incurred by the other party (the indemnified party). It is an agreement between contractual parties in which one party agrees to protect the other party from certain damages or future legal liability. This can be very important in any number of transactions, and is commonly found in other contracts (such as insurance policies) as well.
As indemnity agreements are commonly used to agree for one party to compensate another in the event that any damage or legal liability occurs, they can be used in any number of examples – some of which will be outlined below. Indemnity agreements are a staple of property purchases, for example. If, during a property sale, a tree on the adjoining property begins to leaning over the fence towards over time, the seller could state that the buyer would be fully responsible for the costs of cutting it back. As the tree grows, this could become quite a serious problem.
Indemnity agreements are also commonly used in commercial leases, particularly when it comes to properties that have been significantly upgraded from their original state. If a bar, club or restaurant uses a store front, then upgrades the interior to suit their own business needs (significantly changing the property), a landlord may ask the tenant to agree to cover any liabilities that may arise, and to not hold the landlord responsible for these costs.
Another common use of indemnity agreements is among contractors and homeowners. If a homeowner hires a contractor to work on his or her property, they want to ensure that the contractor will be responsible for any damage that might occur. If an upper room floods, for example, the last thing a homeowner wants is to have to pay for a hotel, cleaning services or even new furniture and carpeting.
There are two broad categories of indemnity agreement that are commonly encountered and used. One form is a broad indemnity agreement, which will broadly state that the indemnifying party will provide funds to the indemnified party to cover any loss or damages that may occur.
The other common form is a limited or specific indemnity agreement. The party that is being indemnified will be covered from named losses or damages and none other.
In addition to these two forms, there are other classifications based on the context to which an indemnity agreement is applicable. The indemnity agreements that may be found in real estate transactions, for example, will commonly be referred to as capital indemnity agreements, and these serve the function of limiting the liability of one party in relation to another in a contract. It is also possible to have indemnity agreements for loans, or loan indemnity agreements.
Affidavits and Indemnity Agreements: What’s the Difference?
In examining the key differences between affidavits and indemnity agreements, it is not enough merely to state that affidavits are sworn documents while indemnity agreements are not. Particularly, the difference in purpose and effect among these two types of documents is much more critical to most end users.
An affidavit is a sworn statement, typically, of a witness. It stays the supporting truth of the facts about which the witness will testify in such a case. In the world of suretyship, where this type of document is so frequent, an affidavit is usually not the final confirmation of the correctness of the underlying claim. The affidavit will correspond to an interim conclusion of an adjuster or engineer, and reflect the current status of the bond principal’s obligation to the bond obligee in connection with the claim.
On the other hand, the indemnity agreement responds to the corporate surety’s portion of a claim paid to the obligee and expected from the principal. That is, the principal is expected to indemnify the surety for a claim to the bond obligee, the amount of which is expected to be determined after investigation is concluded. Thus, an indemnity agreement made during the investigation stage, as opposed to a settlement demand and after, will ordinarily also include a term making the indemnity subject to adjustment according to the final investigation result. If not expressly stated, the indemnity deal should be fairly certain before an adjustment after investigation can be enforced against the bond principal. Perhaps nothing mounts more angry invective from a bond principal than after-the-fact adjustments to otherwise contingent indemnity obligations.
These two documents each serve widely different functions: the affidavit simply supports an interim basis for settlement by the surety and recognizes that the bond principal remains unbound under the customary indemnity agreement. Meanwhile, the indemnity agreement applies only when the surety has paid and expects to be legally and contractually subrogated – perhaps for purposes of pursuit or for putting itself in second position behind its principal – and only when the principal has received notice of the amount of a claim to the surety that it has either paid or taken over has already received. Only the latter document is a binding obligation and, with some exceptions, is binding regardless of whether the bond principal had notice of the particular bond claim.
What You Should Know About Affidavits
A valid affidavit has some minimum requirements. The person signing the affidavit, called the "affiant" in legal terms, must be competent to do so. The individual signing the affidavit must have personal knowledge of the facts contained in the affidavit (although supporting documents may confirm her assertions). The affiant must take an oath or affirmation asserting that the content of the affidavit is true. The affidavit must be in writing so it can be recorded. The person or party asking someone for an affidavit may require additional requirements/restrictions.
Because an affidavit is a formal legal statement, consequences exist if false information is provided in an affidavit. A person or party who receives and relies on an affidavit can bring a lawsuit against the affiant for providing false information. Furthermore, there may be criminal consequences for making a false statement of less than $1500.
A notary public will sometimes be used for an affidavit. The notary is there to assess the affiant’s capacity to understand the process and affirm that the affiant is signing the affidavit voluntarily without undue influence from someone else. A notary may acknowledge the signatures in the affidavit, even if it’s not required. A notary is generally not needed for an affidavit, but they can be helpful.
A Primer on the Legal Aspects of Indemnity Agreements
The underlying legal framework of indemnity is grounded in state law, which generally enforces agreements freely bargained for by the parties. These agreements are enforced in the absence of third parties injuring themselves (or their property), or otherwise violating the agreement. In other words, an indemnity agreement will not be enforced if it violates a third party’s right to seek damages from the party that caused the injury. Factors critical to determining the enforceability of an indemnity agreement include its scope, the identity of the indemnified party, and the type of loss indemnified against.
A complete indemnity will only be enforced if it applies to losses arising out of the indemnifying party’s own negligent conduct, not misconduct by the indemnified party. Partial indemnity will be enforced only to the extent that the indemnified party is deemed to be partly at fault for the injury incurred. Thus, indemnity agreements are not the proper vehicle to exempt the indemnified party from all liability. The inducement of acting in light of an unenforceable agreement may leave the inducing party open to fraud or promissory estoppel claims, among other possible causes of action.
Indemnity agreements also may be drafted to reduce exposure in situations where complete indemnity is legally impermissible. For example, a party may bargain for indemnity against losses arising out of the indemnified party’s own negligence, but not against its own willful acts, unlawful conduct or intentional torts. By limiting the type of losses to be indemnified against , the indemnified party may save itself resources and avoid unnecessary litigation. Conversely, the indemnifying party may wish to limit its liability against certain types of losses and/or losses incurred as a result of the indemnified party’s own negligence. Depending on the strength of the negotiating parties’ relative bargaining power, one practically useful strategy is to balance the scope of covered claims and indemnification.
Clearly, indemnity agreements arise often in real estate contexts, including real estate development, leasing and financing transactions. Often, the indemnity provisions contained in such agreements are standard form. However, they can be individually tailored to address specific concerns, and it may be worthwhile for a party to propose specific changes. Requiring a party to indemnify another party is one way to shift or allocate the risks and/or costs associated with litigation. Weighing the benefits and risks of indemnity provisions will ultimately provide guidance as to their relative appropriateness in any given situation.
In addition to contractual indemnity, some courts permit recovery in tort against various third-party actors for the indemnity of damages caused by the actions of a tortfeasor. These claims arise when a third-party actor takes action that causes a loss for which the indemnitee is liable, but is not solely responsible. Indemnification against wrongful acts that induce others to take action resulting in injury is also permitted. At the end of the day, the extent to which indemnity agreements will be enforced will depend on the scope of the agreement and the relative bargaining power of the parties.
When to Use Affidavits vs. Indemnity Agreements
Affidavits and indemnity agreements prove to be essential in many situations. If you are required to prove the truth of a fact in the case of a will, affidavit, deed, title or any legal document, an affidavit of execution and/or document must be provided even if you have no personal knowledge of the truth of the fact. An indemnity agreement can be used to allow access to or to change title of real estate despite the possibility that the former recorded record title owner may claim an interest in the property or the title company may have an undisclosed interest in the property.
Below we will discuss how affidavits and indemnity agreements can be used in business matters and personal affairs:
Regarding business – Consider a scenario where you lease a space for your business, but the person on the lease cannot continue for any reason or you choose to incorporate. You do not have access to the original person’s signature. How do you gain access to the new company’s lease? An indemnity agreement in favor of the landlord would achieve the result. Regarding personal affairs – A similar scenario occurs if you have a deed which requires a spouse’s signature and the spouse is now dead, incapacitated, missing, or cannot be located. Your remedy would be the same.
Drafting Affidavits and Indemnity Agreements: Tips and Best Practices
Affidavits
- Make sure that all of the information contained in the affiant’s affidavit is accurate. "Attesting" to false statements can lead to charges of perjury, which…well, let’s just say that no one wants to end up on Law and Order.
- Have your affiant review the affidavit carefully, as though he or she will be testifying in court.
- If your affiant is not someone who would generally give a sworn statement, it is advisable that you submit his or her affidavit for judicial approval prior to filing. Without approval, any evidence it contains may be deemed unreliable.
- Make sure to explain to your affiant how important the content and accuracy of his or her affidavit is – and follow up with reminders if necessary. You don’t want to get caught relying on an affidavit that is lacking vital details or filled with inaccuracies.
Indemnity Agreements
- Make sure to keep a copy of any indemnity agreement that is signed with the applicant title insurance company. You could wind up with a liability associated with the property in question if you don’t.
- Remember to draw up an indemnity agreement quickly if your contract or agreement is entered into without title insurance. It is even helpful to take a look at the language the title company would have used if the closing had been insured.
- You may wish to consider adding a requirement in your indemnity agreement that the indemnitee allows you to assume control of the litigation regarding the claim or judgment. Why? If the title claim isn’t settled promptly, it could lead to a demand for repayment that bites you in the you-know-what.
Clearing Up Misconceptions Around Affidavits and Indemnity Agreements
Often times I am contacted by potential clients who are operating under the misconception that an Affidavit and Indemnity Agreement may be utilized to extinguish and/or estop a Claim that has already been paid to the claimant under the bond. This is not the case. A Claimant makes a Claim under the Bond with the surety. The surety investigates the Claim and makes a decision either to pay or deny the Claim. Once the surety pays the claim, the surety is usually done with its work. It can be difficult to get sureties to intercede and attempt to recover a claim it has already paid. As such , just paying the claim may sometimes be the best solution for the surety.
Generally speaking, Affidavits and Indemnity Agreements are tools sureties can use to protect themselves in the event a claim is made under the bond. However, they are not intended to be used after the fact to extinguish a claim that has already been paid or extant claim which has not been paid or denied. Affidavits and indemnity agreements are not some type of post-claim settlement agreement between the surety and the principal or the principal and the claimant.