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

Under an indemnity from Bharat Steels, Deepak is sued by a vendor. Deepak defends the suit against Bharat Steels' express orders not to contest it, and loses, incurring Rs 40,000 in legal costs. Bharat never authorised the defence. Can Deepak recover those costs under Section 125(2)?

Deepak cannot recover the costs. Section 125(2) permits recovery of costs only where the promisee did not contravene the promisor's orders and acted prudently, or where the promisor authorised the suit. Deepak defended against Bharat's express orders and without authorisation, so the right to costs fails.

  1. AYes, because costs always follow damages in an indemnity
  2. BYes, because he acted prudently in defending the suit
  3. CNo, because he contravened the promisor's orders in defending the suitCorrect
  4. DYes, but only if the vendor's claim was wholly unfounded

Explanation

Section 125(2) allows recovery of costs only if, in bringing or defending the suit, the promisee did not contravene the promisor's orders and acted as would have been prudent without any indemnity, or if the promisor authorised the suit. Deepak contravened express orders and had no authorisation, so the condition fails. Option B ignores that both conditions must be met.

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