When a vendor offers indemnity, they are usually agreeing to step in only when a third party sues the customer for something tied to the vendor's product or services. The most common buckets are intellectual property claims (copyright, patent, trademark), bodily injury, and property damage. Vendors frame it this way because they can underwrite or insure these risks and, in many cases, control the defense strategy.
Indemnity rarely covers every disagreement between the contracting parties. Performance failures, missed service levels, or late delivery are normally handled by warranties, service credits, and limitation of liability—not indemnity. If a clause seems to sweep in "any claims arising out of the agreement," vendors worry they are taking on pure breach of contract exposure with no predictability.
For buyers, the key is to align indemnity with the actual risks of using the product: IP claims for software, personal injury for on-site services, and data incidents where appropriate. For vendors, narrowing the scope while keeping it meaningful maintains goodwill without creating open-ended exposure.
THIS IS NOT LEGAL ADVICE.