This error is usually caused by a damaged disk, you may want to try cleaning the disk first and then try to reinstall Stronghold Legends.

If this fails try copying the entire disk to a temporary folder on your hard disk. Then run the setup program from within the disk1 folder on the hard disk. If you are getting errors while copying try using a program, such as this one to attempt to get the data from the damaged area of the disk:

If all else fails return the game to the place of purchase.