Section 124 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 124 opens Chapter VIII, "Of indemnity and guarantee", and defines a contract of indemnity: 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. Indemnity clauses appear in service agreements, leases, share purchase deals and many other documents, so this definition is worth knowing precisely. If you are negotiating or drafting an indemnity, our agreement drafting service can help you word it clearly.
A contract of indemnity is 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. The Act's illustration: A promises to indemnify B against the consequences of proceedings that C may take against B in respect of Rs. 200. Note the numbering: sections 76 to 123 are repealed, so the Act goes straight from section 75 to section 124.
Why the numbering jumps
The Act's Chapter VII (sections 76 to 123, on sale of goods) was repealed by the Indian Sale of Goods Act, 1930, section 65. The source copy lists each section as "Rep. by s. 65, ibid." That is why the next provision after section 75 is section 124. This article and the next ones deal with the provisions in force.
The definition
"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'."
The key phrases:
| Phrase | What it tells you |
|---|---|
| A contract | It must be a contract, with the usual ingredients of a contract (see section 10 in this series). |
| by which one party promises to save the other from loss | The promise is to save from loss, that is, to protect against it. |
| caused to him | The loss must be caused to the other party. |
| by the conduct of the promisor himself | Loss from the promisor's own conduct is covered. |
| or by the conduct of any other person | Loss from the conduct of a third person is also covered. |
Two observations from the words as printed. First, the definition speaks of loss caused by "conduct". It does not mention loss caused by events that are not anyone's conduct, such as a natural event, and this article does not go beyond the text. Second, the section defines the term only; the rights of the person who holds the indemnity when he is sued are in section 125, which has its own article: see section 125.
The person who gives the promise and the person who receives it are not named in section 124 itself; sections 125 onward speak of the "promisor" and the "promisee" or "indemnity-holder".
The Act's illustration
A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of Rs. 200. This is a contract of indemnity.
Here the loss would come from C's conduct (taking proceedings), not A's, and A promises to save B from the consequences. That is the "conduct of any other person" limb.
Indemnity compared with guarantee
The next section, 126, defines a "contract of guarantee": a contract to perform the promise, or discharge the liability, of a third person in case of his default; see section 126. The Act treats them in the same chapter, but the definitions differ.
| Point | Indemnity (s.124) | Guarantee (s.126) |
|---|---|---|
| What is promised | To save the other from loss | To perform the promise or discharge the liability of a third person in case of his default |
| Source of the loss/liability | Conduct of the promisor or of any other person | Default of the third person (principal debtor) |
| Parties named in the text | One party promises the other | Surety, principal debtor and creditor |
A modern example (ours)
Nikita runs an online store and engages Omkar Logistics to deliver orders. Their service agreement says that Omkar will indemnify Nikita against any claim a customer may make against her for damage to goods in transit caused by Omkar's drivers. A customer sues Nikita over a crushed parcel. The clause is a promise by Omkar to save Nikita from loss caused by conduct, here the conduct of Omkar's drivers, and so fits section 124. A clause that said "Omkar will pay if the customer fails to pay Nikita" would be closer to a guarantee, because it concerns the default of a third person.
What can the parties change?
Section 124 is a definition and has no "contrary intention" language. What it leaves to the parties is the scope: the events, the persons and the loss covered. A well-drafted indemnity clause states what is covered, what is excluded, how and when notice is given, who controls the defence and any cap. The text of section 124 says nothing about caps or notice. Section 125 governs the indemnity-holder's rights when sued, "acting within the scope of his authority".
Practical points
- Say "indemnify" and describe the loss. The definition rests on a promise to save from loss.
- Identify whose conduct triggers it: the promisor's, a named third party's, or "any other person".
- Set out the claims process: notice, defence, settlement and records.
- Keep it separate from guarantee wording if you do not intend a guarantee.
- For the chapter overview, see indemnity and guarantee: sections 124 to 147. For stamping questions, see our guides on stamp duty on an indemnity bond; this article gives no figures.
Need help drafting or reviewing an indemnity clause?
An indemnity that is too wide can expose you to open-ended claims; one that is too narrow may not protect you when you need it. Our agreement drafting team can draft or review the clause, set out the covered events and align it with the rest of the contract. Share the agreement and tell us which side of the indemnity you are on.
Key takeaways
- A contract of indemnity is a contract by which one party promises to save the other from loss caused by the conduct of the promisor himself or of any other person (s.124).
- The Act's illustration: an indemnity against proceedings that C may take against B in respect of Rs. 200.
- The definition speaks of loss caused by conduct.
- Rights when sued are in section 125; guarantee is defined in section 126.
- Sections 76 to 123 are repealed, so Chapter VIII follows directly after section 75.
Read next
- Section 125: rights of indemnity-holder when sued
- Section 126: contract of guarantee, surety, principal debtor and creditor
- Indemnity and guarantee: overview of Sections 124 to 147
- Stamp duty on indemnity bond
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.