Contract act section 125

 


Section 125 of the Indian Contract Act, 1872 – Rights of Indemnity Holder 

If a person has been promised protection against loss under a contract of indemnity under section  125 indian contract act .and a lawsuit is filed against him regarding that matter, he can recover the following amounts from the person who gave the indemnity (the promisor): 

  1. Damages – Any compensation that he is legally required to pay in the suit. 

  2. Legal Costs – The expenses of bringing or defending the suit, provided he acted reasonably and did not disobey the promisor's instructions (or was authorized by the promisor). 

  3. Compromise/Settlement Amount – Any amount paid to settle the case, if the settlement was reasonable and not against the promisor's instructions (or was authorized by the promisor). 

Simple Illustration

A promises B:

"If anyone sues you regarding this property transaction, I will bear the loss."

Later, C sues B.

 B pays:

  • ₹50,000 as damages,

  • ₹10,000 as legal expenses,

  • ₹20,000 in a reasonable settlement.

A will have to give following amount to B 
Amount of damages +amount legal expenses of suit +amount of reasonable settlement 

B can recover all these amounts from A under Section 125, provided B acted prudently and within the authority given by  A.he cannot disobey instructions of A 

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