Section 125 of ICA : Section 125: Rights Of Indemnity-Holder When Sued

Explanation using Example

Imagine that Raj operates a delivery service and enters into a contract with Anita, where Anita promises to indemnify Raj against any losses or damages that may arise while he is delivering goods on her behalf. One day, Raj is sued by a third party for accidentally damaging their property during a delivery for Anita.

Under Section 125 of the Indian Contract Act, 1872:

1. If Raj is found liable and has to pay damages to the third party, he can claim these damages from Anita, as per the indemnity contract.
2. Raj can also recover the legal costs of defending the lawsuit from Anita, provided he followed her instructions and acted prudently, just as he would have if there were no indemnity contract, or if Anita had authorized him to defend the lawsuit.
3. If Raj decides to settle the lawsuit and the settlement is reasonable and not against Anita's instructions, or if Anita had authorized the settlement, Raj can claim the settlement amount paid from Anita.