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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Sunrise Logistics indemnifies Arvind against any suit by a customer over damaged goods. A customer sues Arvind, and he is compelled to pay Rs 80,000 as damages in respect of a matter to which the promise to indemnify applies. He acted within the scope of his authority. What is Arvind's position under Section 125?

Arvind can recover the full Rs 80,000 from Sunrise Logistics. Under Section 125(1), an indemnity-holder acting within his authority is entitled to all damages he is compelled to pay in a suit concerning a matter covered by the indemnity, without needing separate authorisation to defend.

  1. AHe can recover the damages only if Sunrise had authorised him to defend the suit
  2. BHe can recover the Rs 80,000 damages from Sunrise as all damages he is compelled to pay in such a suitCorrect
  3. CHe cannot recover anything unless he first obtains Sunrise's consent to the payment
  4. DHe can recover only half the damages, as liability is shared equally

Explanation

Section 125(1) entitles the indemnity-holder, acting within the scope of his authority, to recover all damages he may be compelled to pay in any suit in respect of a matter to which the promise to indemnify applies. No authorisation to defend is required for damages; that condition applies to costs. Option A confuses the damages rule with the costs rule in clause (2).

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