Our outside counsel has advised our County that we can insert the words "to the extent allowed by law" prior to an indemnification paragraph in a contract or agreement.
In light of AG opinion GA-0176, which holds:
"Article XI, section 7 of the Texas Constitution prohibits Bastrop County from indemnifying (another governmental agency) BCAD, its officers and employees for their actions in performing 9-1-1 services for the county under contract UNLESS the county, at the time of contracting, levies and collects a tax as required by the constitutional provision."
The AG opinion goes further in specifying what kind of tax and sinking fund is required when a debt is created.
Do you use these qualifying words? Do they have an effect on the validity of the overall contract? Is there an argument for justified reliance from the party seeking indemnification?
The most straight forward path to me seems to be to deny any contracts containing indemnification provisions if the party seeking indemnification refuses to remove this language from the contract.
I'd appreciate any opinions or advice. Is there any case law on this qualifying language?
We generally strike them (indemnification clauses). The "to the extent permitted by law" language, absent other language creating an interest and sinking fund or explicit agreement to levy sufficient tax to pay the indemnification obligation, is likely insufficient to save the potential debt creation from the constitutional proscription. And there is case law suggesting that a violation of art. 11, sec. 7 renders the contract void (not just voidable). That's a pretty powerful argument for striking the clause, rather than arguing about nibbling around the edges.
I strike them. I normally have some "rewrite" issues anyway and do this as well.
Lisa L. Peterson
Nolan County Attorney
I knew you'd agree with me on this, Scott. Can you shoot me some case law to throw at the behemoth law firm that knows it all?
Scott, are we talking about T&N.O.R.R. v. Galveston Co?
Well, I upset one of our outside counsel with this thread.
And here I thought I was doing well with seeking answers to questions I don't know. When I questioned further about whether inserting such qualifying language could result in litigation by the indemnified party, I was told yes, it could.
One lawyer of that firm did tell me that I was correct, that it could result in litigation over the indemnification language, and unfortunately by another lawyer of that firm "I'm not going to debate this anymore".
I guess it ain't all butterflies and rainbows in the law firm bidness.
I'll add that my county was unaware that litigation could result over the inclusion of words such as this.
I'll stick with my previous posture. No, to indemnification. And then I'll say...I'm not going to debate this with you anymore. I guess the lawyer that said that sure isn't a trial lawyer.
I've had vendors ask if including that language would satisfy us. My position is that we don't want to be in the business of indemnifying anyone even if there is a way to do it legally. So why agree to any indemnification language at all?
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