Contract
Indemnity clauses
An indemnity is a promise to cover another party's loss arising from defined events. It is not the same as a right to sue for breach, and the difference is procedural as much as substantive: an indemnity can pay out where a breach claim would fail.
By The Retail Ledger · September 27, 2026
How it differs from a damages claim
A damages claim requires a breach, causation and loss that is not too remote. An indemnity requires only the triggering event described in the clause. That is why indemnities are used for third-party claims: product liability, intellectual property, regulatory penalties, where the loss arrives from outside the contract entirely.
It is also why indemnities frequently sit outside the liability cap, as noted in limitation of liability.
The scope questions
Four decide the value of the clause. What triggers it, and is the trigger a claim being made or a claim being proven? Does it cover defense costs as they are incurred or only after judgment? Who controls the defense and any settlement? And is it capped, or does it survive the cap?
An indemnity that only pays after a final judgment, with no defense costs and no control of the litigation, is worth far less than the same sentence with those three terms reversed.
Where it matters in surplus trade
Resale restrictions and brand protection are the usual context. A brand disposing of goods commonly takes an indemnity against the consequences of the buyer reselling outside the permitted channels, which is the enforcement mechanism behind the terms in resale restrictions.
Questions
What is an indemnity?
A contractual promise by one party to cover the other’s loss arising from defined events, often third-party claims.
How is it different from damages?
Damages require proving breach, causation and non-remote loss. An indemnity requires only the trigger described in the clause.
Are indemnities capped?
Often they are carved out of the liability cap, which is one reason they are negotiated separately.
General information about commercial contract concepts, not legal advice.