(Learn more about the 3 types of indemnification clauses in the construction sector) PandaTip: An example of where this agreement can be useful is that one party uses another party`s property for a function and the latter does not want to take responsibility for what may happen during the function. In this case, the above “description” would be “use the indemnified party`s property in X to host a function…” ». What is a compensation agreement? A compensation agreement is a contract by which the parties agree that the other is held “harmless” for loss or damage, or where the parties agree that the other is legally exempt from loss or damage. An act of compensation protects persons who have acted unlawfully from punishment. .