4.1 The Academy shall, subject to clauses 4.3, 4.4, 4.5, 4.8 to 4.11 (inclusive), be responsible for and shall release and indemnify the Authority from and against all liability for Direct Losses that arise out of or in connection with any Normal Payment Matters.22 No claim shall be made under this clause 4.1 unless the Authority has provided to the Academy a valid VAT invoice.
4.2 NOT USED
4.3 The Authority shall promptly upon becoming aware of any claims under clause 4.1 which it intends to pursue serve written notice on the Academy (with a copy provided to the DFE) of such claims (the "Academy Notification") and the Academy shall discharge any liability in full within [five (5)] Business Days of such notification or, if it disputes the Academy Notification, subject to clause 4.4, within five (5) Business Days following determination of such dispute.
4.4 If the Academy fails to pay any amount detailed in the Academy Notification within (five) 5 Business Days of the Academy Notification (regardless of whether or not the Academy has disputed the claim) the Authority shall promptly notify the DFE in writing (the "DFE Notification") and the DFE shall, subject to clauses 4.1, 4.9 to 4.11 (inclusive), pay any such claim to the Authority in full within twenty (20) Business Days of the DFE Notification unless such claim has previously been satisfied by the Academy. In the event that it is later agreed or determined that the Authority was not entitled to either the whole or any part of the amounts claimed (an "Illegitimate Claim"), DFE may set off any Illegitimate Claims from the DSG or from any other monies due to the Authority whether under this Agreement or otherwise.
4.5 Neither the Academy nor the DFE shall be responsible or be obliged to indemnify the Authority pursuant to this clause 4 to the extent that any Normal Payment Matters liabilities are caused by (i) the negligence or wilful misconduct of the Authority, the Contractor, [the LEP] or any of their Related Parties or (ii) a breach by the Authority or any Authority Related Party of this Agreement, the [Development and] School Agreement, the Project Documents, [the ICT Services Contract,] [and/or the Lease] or (iii) any breach of the Project Agreement by the Contractor or a Contractor Related Party or (iv) any breach of the ICT Services Contract by the LEP or any LEP Related Party.
4.6 The DFE shall not be responsible or be obliged to indemnify the Authority pursuant to clause 4.4 to the extent that the Authority is in breach of its obligations under clause 6 to provide information that is relevant to such claim.
4.7 The DFE shall promptly give the Academy written notice of any steps taken by the Authority to enforce its rights pursuant to clause 4.4 including details of amounts which the DFE is proposing to pay to the Authority under clause 4.4.
4.8 The Authority and the Academy shall not settle or compromise any claim which may be fully or partially funded by the DFE pursuant to the terms of this Agreement without the prior written consent of the DFE (such consent not to be unreasonably withheld or delayed).
4.9 For the avoidance of doubt, the indemnities in clauses 4.1 and 4.4 shall not extend to any Direct Losses incurred by the Authority to the extent caused by any Authority Change or Contractor Change where the consent of the DFE is required pursuant to this Agreement and such consent has not been obtained.
4.10 Where any party ("Indemnified Party") wishes to make a claim under this Agreement against the other ("Indemnifying Party") whether in relation to a claim made against it by a third party ("Third Party Claim") or otherwise, then:
4.10.1 any and all claims by the Indemnified Party shall be made in accordance with clause 4; and
4.10.2 the Indemnified Party shall give notice of the relevant claim as soon as reasonably practicable setting out full particulars of the claim; and
4.10.3 the Indemnifying Party shall, if it wishes to have conduct of any Third Party Claim, give reasonable security to the Indemnified Party for any cost or liability arising out of the conduct of the Third Party Claim by the Indemnifying Party.
4.11 Any liability under a claim made pursuant to any indemnity contained in this Agreement shall be reduced to the extent that the Indemnified Party recovers any sums under the terms of any insurance policy for the time being in place.
4.12 If the Academy or DFE shall have paid to the Authority any amount in respect of a claim under any indemnity contained in this Agreement and the Authority subsequently receives or recovers from a third party (including an insurer) a sum which is referable to such claim, the Authority shall forthwith repay to the Academy or, as the case may be, DFE the amount so received or recovered less the reasonable costs and expenses incurred in connection with such recovery up to the amount which has been paid by the Academy or DFE in respect of such claim.
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21 The rationale behind the Normal Payment Matters is explained in the DFE note "Proposed conversion of Schools participating in closed PFI projects into Academies". In summary, these are matters which are ordinarily covered by GAG Funding paid by DFE to the Academy. Examples include the Academy Contributions to the Unitary Charge. The Academy is obliged to pay the Authority for such matters under the Schools Agreement. If the Academy fails to pay the Authority can call upon clause 4. The DFE will only have responsibility for these matters in circumstances where the Academy fails to pay, in which case the DFE is sympathetic to the Authority's position/exposure to the PFI Contractor. The DFE will later seek reimbursement of any outlay pursuant to clause 4.4 from the Academy by way of set off from future GAG payments.
22 The Academy will want to undertake its own due diligence on the terms of the Project Agreement, its schedules and any other relevant documents. This will be relevant to the Academy's potential exposure under the Normal Payment Matters .