Explain: indemnify and hold harmless (seems contradictory)

Question

A person is presented with a contract with a consulting company, of which he will be a client

Section 8. Indemnification (see below) seems to me to be contradicting itself, but I could be misunderstanding something. Could someone please give me a plain explanation as to what this paragraph is saying in regards to indemnification and hold harmless?

8 Indemnification

Each party hereto (the "Indemnifying Party") agrees to indemnify and hold harmless each other party (each, an "Indemnified Party") and all employees, representatives, directors, officers, shareholders and persons affiliated with the Indemnified Party against all claims, damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened actions)(collectively "Losses") incurred by the Indemnified Party arising out of or resulting from (a) the gross negligence, willful misconduct or fraud of the Indemnifying Party or (b) a breach by the Indemnifying Party of its representations and warranties, covenants or other obligations under this Agreement. In addition, except in the case of fraud or willful misconduct, the Client agrees to indemnify and hold harmless Dara and its respective employees, representatives, directors, officers, shareholders and person affiliated with them against all Losses incurred by them in the performance of their obligations under this Agreement.

Answer 1

It seems to me that this section says that if any party commits "gross negligence, willful misconduct or fraud" then all costs and damages that might result from this fall on the party committing such violations. In the absence of such willful misconduct or fraud the client holds the consulting firm harmless and covers all losses (as defined in the section) resulting from the consulting firm carrying out its side of the contract, or trying to.

There does seem a slight inconsistency as regards any "gross negligence" which is not also "willful misconduct or fraud", as the first part of the section puts any losses for "gross negligence" on the party who is negligent, but the second part does not include "gross negligence" in the things that the client does not indemnify the consulting firm for.

Answer 2

Could someone please give me a plain explanation as to what this paragraph is saying in regards to indemnification and hold harmless?

The currently accepted answer misses the client's actual vulnerability that the Indemnification clause entails. This has nothing to do with the triviality of "gross negligence" being mentioned only in the former portion of the clause and not thereafter.

The first half (or two thirds) of the clause outlines liabilities in the event that conditions (a) and/or (b) occur. But the remaining portion of the clause is more of a catch-all provision whereby the client agrees to cover all other losses incurred by the company: The client essentially --and perhaps inadvertently-- is positing himself as the company's insurer for any and all losses (conditions (a) and (b) excluded) that the company might incur during its performance of the contract.

By way of example, if the company's services involve delivery (on client's behalf) of merchandise and a third-party crashes the company's vehicle during the delivery, the clause clearly indicates that the client will have to compensate the company for any losses arising from the accident/crash, such as repair of vehicles or medical treatments.

Besides trivial, the aforementioned issue of gross negligence is inconsequential. Since

1. the clause initially allocates responsibilities based on who caused damages,
2. thereafter it unequivocally makes the client responsible for losses (by implication, including those resulting from the company's gross negligence), and
3. it is evident that the client (you) is (are) not the draftsman of the contract,

the doctrine of contra proferentem entitles the client to adopt the version (be it 1. or 2.) that favors him in resolving the ambiguity of 1. vs 2. in a scenario of company's gross negligence. In that case, client will obviously adopt 1. Therefore, the subsequent absence of term "gross negligence" has no effect on the contract.

That being said, I would like to emphasize that the preceding paragraph pertains to the issue of gross negligence. For anything else not involving company's fraud, gross negligence, or willful misconduct, the client is committing to de facto insure the company as I described above.