Introduction

The right to indemnity ( S 222 & 223)

The right to indemnity is founded upon the statutory provision contained in section 222 of the ICA ( Kishan Lal v. Bhanwar Lal )

222. Agent to be indemnified against consequences of lawful acts

Illustrations

(a) B, at Singapore under instructions from A of Calcutta, contracts with C to deliver certain goods to him. A does not send the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses.

(b) B, a broker at Calcutta, by the orders of A, a merchant there, contracts with C for the purchase of 10 casks of oil for A. Afterwards A refuses to receive the oil, and C sues B. B informs A, who repudiates the contract altogether. B defends, but unsuccessfully, and has to pay damages and costs and incurs expenses. A is liable to B for such damages, costs and expenses.

223. Agent to be indemnified against consequences of acts done in good faith :

Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it may cause an injury to the rights of third persons.

Illustrations

(a) A, a decree-holder and entitled to execution of B’s goods requires the officer of the court to seize certain goods, representing them to be the goods of B. The officer seizes the goods, and is sued by C, the true owner of the goods. A is liable to indemnify the officer for the sum which he is compelled to pay to C, in consequence of obeying A’s directions.

(b) B, at the request of A, sells goods in the possession of A, but which A had no right to dispose of. B does not know this, and hands over the proceeds of the sale to A. Afterwards C, the true owner of the goods, sues B and recovers the value of the goods and costs. A is liable to indemnify B for what he has been compelled to pay to C, and for B’s own expenses.

Prashant is having in possession of laptop the owner of which is Sharad

Prashant in spite of not having authority to sell laptop instructs Sandeep to sell the laptop.

Sandeep not aware of this fact, sells the laptop @ Rs. 25,000/- and hand over the money to Prashant.

Afterwards Sharad, the true owner, recovers Rs. 25000/- with cost.

Prashant is liable to indemnify Sandeep the amount paid to Sharad along with the expenses incurred by Sandeep, because Sandeep acted as per the instruction of Prashant in good faith.

The agent must have been damnified in the lawful conduct of the business of agency. A wagering agreement is not unlawful. It is only void. Accordingly the SC in Kishanlal v. Banwarlal allowed an agent to recover indemnity for losses incurred by him in wagering transactions entered into an instructions of his principal.

(Reference section 23 & section 25 to 30. Every illegal agreement is void but a void agreement is not necessarily illegal. Void agreement may not be forbidden, the law may merely say that, if it is made the courts will not enforce. eg : Section 30 : Agreements by way of wager are void; and no suit shall be brought for recovering anything)

(Also refer case Adamson v. Jarvis mentioned above.)

“Where the act done by the agent on instructions from his principal is apparently lawful, but it turns out to be unlawful or injurious to a third person, the agent is entitled to indemnity against the consequences of the act”.

224. Non-liability of employer of agent to do a criminal act :

Where one person employees another to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied promise to indemnify him against the consequences of that Act.

Illustrations

(a) A employs B to beat C, and agrees to indemnify him against all consequences of the act. B thereupon beats C, and has to pay damages to C for so doing. A is not liable to indemnify B for those damages.

(b) B, the proprietor of a newspaper, publishes, at A’s request, a libel upon C in the paper, and A agrees to indemnify B against the consequences of the publication, and all costs and damages of any action in respect thereof. B is sued by C and has to pay damages, and also incurs expenses. A is not liable to B upon the indemnity.

Ram Kumar v. Laksmi Narayan : An agent who was appointed to import adulterated mustard oil, suffered loss and punishment, but he could not recover indemnity.

Right to compensation (S225)

Every principal owes to his agent the duty of care not to expose him to unreasonable risks. The illustration appended to the section makes the point clear (Federal Ins Co v.Nakano Singapore P Ltd.)

225. Compensation to agent for injury caused by principal’s neglect

The principal must make compensation to his agent in respect of injury caused to such agent by the principal’s neglect or want of skill.

Illustration

A employs B as a bricklayer in building a house, and put up the scaffolding himself. The scaffolding is unskillfully put up, and B is in consequence hurt. A must make compensation to B.