Indemnification – Georgia Car Law Authority

An indemnification provision in a dealer finance agreement is where the finance company is entitled to payment from the dealer in relation to any claims not related to the finance company’s activities. Watch this video to learn more and for some tricks when considering a contract containing an indemnification provision.


Below is a transcript of the video:

We just got through talking about recourse and repurchase, but there’s another provision that’s important to note in a dealer finance agreement, and that’s indemnification. Indemnification essentially means reimbursement. In these cases, it’s where the finance company is entitled to reimbursement or indemnification from the dealer in relation to any claims not related to the finance company’s activities. In a future video, we talk about the Holder rule and we talk specifically about how it could happen that a dealer could commit fraud on a consumer or an alleged fraud, and the consumer can actually sue the finance company for the fraud of the dealer.

Indemnity Agreement

If that happens, then a lot of times the finance company, maybe they’re entitled to demand repurchase or recourse. Maybe they’re entitled to demand indemnification, which is basically them saying, “dealer, you’ve got to pay us for all the attorney’s fees we incur for having to defend this case. Oh, and by the way, if there’s a judgment against us, you have to pay that, too.” That would be in the indemnification clause.

Some dealer agreements with finance don’t even have a recourse or repurchase provision. There’ll be a no-recourse agreement, which is great for the dealer, but they’ll have a heavy indemnification clause to make up for it. So, again, just something to be aware of. It’s not always the exclusive remedy, but indemnification is the real deal with finance.




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