This clause makes one party promise to pay the other party's legal costs and damages if there's a data breach caused by the first party's failure to protect personal information. Under UK GDPR and similar laws, companies can face fines up to €20 million (or 4% of global revenue) for data breaches, plus claims from affected individuals. This clause shifts that financial risk from one party to another—so if you sign it, you're agreeing to cover someone else's losses if you mishandle their data. It matters because data breaches are increasingly common and the costs are enormous. The legal principle is "indemnification"—one party compensates another for losses they suffer.
Push back on this clause unless you have excellent data security practices already in place. Ask the other party to limit the indemnity to breaches caused by your "gross negligence" or "willful misconduct" rather than any failure—this protects you from paying for minor mistakes. Also negotiate a cap on how much you could owe (for example, capped at the contract value or a specific amount), because unlimited liability could bankrupt you if a major breach occurs. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause makes one party promise to pay the other party's legal costs and damages if there's a data breach caused by the first party's failure to protect personal information.
Why should I care about this clause?
Under UK GDPR and similar laws, companies can face fines up to €20 million (or 4% of global revenue) for data breaches, plus claims from affected individuals.
What are my options?
This clause shifts that financial risk from one party to another—so if you sign it, you're agreeing to cover someone else's losses if you mishandle their data.
How does this affect small businesses?
It matters because data breaches are increasingly common and the costs are enormous.