TSA Pre-Signing Review
Make the indemnities actually bite.
We draft the indemnities that matter and align them with the cap so they reach the loss. Fixed-fee proposal in 48 hours. The first conversation is always free.
The indemnification clause decides who answers when a third party brings a claim out of the TSA, and a buyer that treats it as boilerplate can find its hard won liability protections quietly undone. Disciplined TSA negotiation reads the indemnities, the cap, and the exclusions as one connected structure. The seller wants narrow indemnities that sit under the general cap. The buyer wants the indemnities that matter to bite where the real risk lives.
An indemnity is a promise by one party to cover defined losses the other suffers, usually without the claimant having to prove a breach of contract in the ordinary way. In a TSA it shifts specific risks from the buyer to the seller, or the reverse, by naming the categories of loss each party will stand behind.
Indemnities matter most for losses that flow from someone outside the contract. If a regulator, an employee, or a vendor brings a claim connected to the way the seller delivered the service, the indemnity decides whether the buyer carries that cost or passes it to the seller who caused it.
A TSA usually contains a small number of targeted indemnities rather than a broad promise to cover everything. The buyer focuses on the categories where the risk is real and the seller is the right party to bear it, then drafts those indemnities so they actually reach the loss.
The buyer approaches the clause by asking which third-party claims could realistically arise from the service, then ensures each is covered by an indemnity that is not hollowed out by the cap and exclusions elsewhere in the agreement.
Data and security sit at the top of the list. During the TSA the seller processes the buyer data in shared systems, so a breach can expose the buyer to regulatory penalties and third-party claims. A data indemnity that covers the costs of a breach caused by the seller is a core buyer protection rather than an optional extra.
Intellectual property is the second priority. If the seller delivers the service using software or materials that infringe a third party right, the buyer can face an infringement claim for something it never controlled. An IP indemnity puts that risk back with the seller who chose the tools.
Employment and tax claims connected to the service deserve attention where the seller runs payroll or similar functions. If the seller mishandles a withholding or a filing during the TSA, the resulting authority claim should fall to the seller, not the buyer who relied on the service.
The buyer also considers an indemnity for losses caused by the seller breach of law in delivering the service, which catches regulatory exposure that the performance obligations alone may not reach. Each indemnity is drafted to the specific risk rather than left as a vague promise.
Most indemnities respond to third-party claims, so the clause sets out how those claims are handled. The procedure covers who notifies whom, who controls the defence, who can settle, and how costs are met as the claim runs. A buyer reads this conduct mechanism as carefully as the indemnity itself.
Control of the defence is a real negotiation. A seller that funds the indemnity often wants to control the defence and any settlement, but the buyer has its own reputation and ongoing relationships at stake. The buyer negotiates a say over any settlement that affects it, particularly one that admits fault or imposes non monetary terms.
Notice provisions can become traps. A clause that voids the indemnity if notice is even slightly late hands the seller an escape route, so the buyer resists language that makes prompt notice a strict condition rather than a reasonable obligation, and limits any reduction to actual prejudice the delay caused.
Getting the conduct provisions right ensures the indemnity delivers in practice, not just on paper, when a real claim arrives and both parties have an interest in how it is run.
Indemnities rarely stand alone. They interact with thresholds, with the general liability cap, and with the exclusions of consequential loss, and a buyer that wins a strong indemnity can still recover little if those other terms cut it down. Reading the indemnities and the limitation of liability together is essential.
Thresholds and baskets borrowed from the acquisition agreement sometimes appear in a TSA, requiring losses to exceed a floor before the indemnity responds, or only allowing recovery above the floor. The buyer confirms whether such mechanisms apply and resists ones that would absorb the realistic size of a TSA claim before any recovery begins.
The cap interaction is the sharper issue. If the indemnities sit under the general liability cap and inside the consequential loss exclusion, a fee based cap can shrink a data or IP indemnity to a fraction of the actual loss. The buyer negotiates to place the key indemnities outside the cap, or under a higher dedicated cap, so they reach the harm they are meant to cover.
The buyer maps each indemnity against the cap and the exclusions before signing, because an indemnity that looks strong in isolation can be quietly neutered by the limitation clause three pages later.
Indemnities are a pre-signing negotiation, not a post-close repair. While the deal is live the seller wants to close and the buyer can trade across the whole agreement, so the indemnities, the cap, and the exclusions move together. After signing the buyer has little to offer in exchange for a better indemnity.
The buyer approaches the clause as part of the wider risk allocation. It names the indemnities that matter, fixes the conduct provisions so claims can be run sensibly, and aligns the indemnities with the liability cap so the protection survives the limitation clause.
This does not mean demanding indemnities for every conceivable risk. A focused set of indemnities covering data, IP, employment, tax, and breach of law, drafted to bite and protected from the cap, is worth more than a long list that the limitation clause renders symbolic.
A disciplined buyer settles the indemnities during a pre-signing review, alongside the liability cap and the scope, while it still holds the leverage to shape them.
Focus on data and security, intellectual property, employment and tax claims connected to the service, and the seller breach of law in delivering it. These are the categories where third-party claims are realistic and the seller is the right party to bear the cost.
The seller funding the indemnity often wants to control the defence, but the buyer has reputation and relationships at stake. The buyer negotiates a say over any settlement that affects it, particularly one admitting fault or imposing non monetary terms.
Often the seller draft places them there. If indemnities sit under a fee based cap and inside the consequential loss exclusion, a data or IP indemnity can shrink to a fraction of the loss. The buyer negotiates to place key indemnities outside the cap or under a higher dedicated cap.
It can if the clause makes prompt notice a strict condition. The buyer resists language that voids the indemnity for slightly late notice and limits any reduction to the actual prejudice the delay caused.
Where to set the cap, what to exclude, and the carve-outs that matter.
Read the article →How warranty wording interacts with the liability cap in a TSA.
Read the article →Which obligations survive exit and for how long they bind the parties.
Read the article →The 90-day governance, IT, finance, HR and procurement separation plan we run on live carve-outs. Get the playbook plus the bi-weekly Day One Letter — short, signal-heavy, buyer-side.
No spam. Unsubscribe in one click. · Read the overview first →
We draft the indemnities that matter and align them with the cap so they reach the loss. Fixed-fee proposal in 48 hours. The first conversation is always free.
Seven buyer-side moves to exit a Transition Services Agreement on time and below budget. The mark-up, the extension-fee curve, exit sequencing, and the 11-month calendar.
The TSA's exit is written into its clauses long before the project starts. This playbook covers the step-down right, liability caps, termination, survival and the language a buyer must place before signature. On a representative carve-out, the seven clauses below are worth more than any signature discount — the missing step-down right alone can lock in $1.4M of avoidable cost.
One tactic, one benchmark, or one pattern from a recent buyer-side engagement. Short. Signal heavy. Free.
Subscribe to The Day One Letter →