Section 124 Indian Contract Act, 1872 - Contract of Indemnity Defined
Section 124 of the Indian Contract Act, 1872 defines a "contract of indemnity". It is the opening provision of Chapter VIII, which deals with indemnity and guarantee.
What is a contract of indemnity under Section 124?
Section 124 - "Contract of indemnity" defined.
A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a "contract of indemnity".
Meaning and essential elements of Section 124
In simple terms, an indemnity is a contractual promise to protect another person against a specified loss. For the statutory definition in Section 124, there must be a contract, a promise to save the other party from loss, and the loss contemplated by the provision must arise from the conduct of the promisor or another person.
The person giving the promise is commonly described as the indemnifier, while the person protected against the loss is the indemnity-holder. Section 125 expressly uses the expression "indemnity-holder" when stating the promisee's rights in specified circumstances.
Illustration given in the Act
A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity.
The illustration shows the basic structure: A promises protection to B against the consequences of proceedings that may be taken by C.
Section 124 and Section 125
Section 124 supplies the definition. The immediately following Section 125 deals with the rights of an indemnity-holder when sued. Subject to the statutory conditions, Section 125 covers damages, costs and sums paid under a qualifying compromise.
Indemnity and guarantee are different concepts
Section 124 deals with indemnity. A guarantee is separately defined by Section 126 as a contract to perform the promise, or discharge the liability, of a third person in case of that person's default. The statutory structure therefore treats indemnity and guarantee as distinct contractual arrangements.
Official text of the Indian Contract Act, 1872
For the authoritative statutory text and current Central Act record, consult the Government of India's official Indian Contract Act, 1872 on India Code. The Act is Act No. 9 of 1872.
Note: This page is a general explanation of Section 124. Contractual rights can depend on the wording of the agreement and the facts of the particular transaction.