Louisiana Contractors License Practice Exam

Which provision releases a party from liability for losses incurred by a third party?

1. Indemnification

2. Force majeure

3. Warranty

4. Delays and extensions

The correct answer is: Indemnification

The correct choice, which focuses on indemnification, refers to a provision commonly included in contracts that is specifically designed to release one party from liability for losses or damages incurred by a third party. This is achieved through an agreement where one party agrees to compensate or reimburse another party for specific losses, costs, or damages that arise from claims made by third parties. Indemnification serves as a protective measure, ensuring that if an incident occurs leading to a claim or loss, the indemnifying party will cover those costs, thereby shielding the other party from financial responsibility. This concept is especially relevant in construction and contract law, where unforeseen accidents or issues may lead to claims by third parties, such as clients or subcontractors. In contrast, the other options do not serve the same purpose. Force majeure deals with unforeseeable circumstances that prevent contract fulfillment and does not offer liability release. A warranty typically involves guarantees regarding the quality or performance of a product or service but does not relieve a party from liability for third-party losses. Delays and extensions relate to timeframes for project completion, not liability coverage.