Mutual indemnity is the contracting structure where each party agrees to defend and hold the other harmless against specific categories of third-party claims. It contrasts with the more common one-way structure, where only the vendor indemnifies the customer.
In a mutual indemnity, each party has a defined obligation. The vendor typically indemnifies for IP infringement (claims that the product itself infringes) and sometimes for breach of confidentiality or data-security obligations. The customer indemnifies for the customer's data (claims arising from data the customer provides), the customer's use of the product (claims arising from how the customer deploys it), and any customer-side branding, content, or instructions to the vendor.
The right structure depends on the deal. Customer-side indemnification matters more when the customer brings significant data, content, or end-user relationships into the engagement. A media platform contracting with a contractor whose work appears under the platform's brand has a real exposure to claims arising from that content. A SaaS vendor processing customer-supplied data has real exposure to claims that the data itself is unlawful. Mutual indemnity reflects that two-way reality.
In drafting, mutual indemnity clauses usually mirror each other in structure: each side covers defined categories, with similar carve-outs and similar caps (or similar exclusions from the LoL cap). Asymmetric structures, where one side gets uncapped indemnity and the other gets a capped one, are negotiable when one party's exposure is genuinely larger, but they should be priced into the deal rather than accepted as boilerplate.