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

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 222 All 266 Sections of Indian Contract Act Section 224

Legal Commentary & Landmark Judgments: Section 223

Section 223 establishes the principal's mandatory statutory liability to indemnify an agent against all civil consequences, damages, and legal costs resulting from acts done in good faith within the scope of employment, even if the act injures the rights of third persons.

  • Prerequisite of Bona Fide Execution: The agent must perform the commissioned act in good faith, without knowledge that the act is wrongful, tortious, or an infringement of third-party property rights.
  • Comprehensive Civil Indemnity: The indemnity covers all damages, settlements, judicial costs, and expenses reasonably incurred by the agent in defending or satisfying third-party claims arising from the authorized act.
  • Allocation of Enterprise Risk: Codifies the commercial principle that the principal, who directs the activity and seeks its economic benefits, must bear the legal risks and liabilities of its execution.
Key Landmark Precedents:
  • Sheffield Corpn. v. Barclay [1905] AC 392: The House of Lords held that where a person does an act at the request of another which is not manifestly tortious to his knowledge, the law implies an obligation on the requesting party to indemnify him against third-party claims.
  • Secretary of State v. Bank of India Ltd. AIR 1938 PC 191: The Privy Council affirmed that an agent or financial institution presenting a forged security in good faith at the principal's instance is entitled to full statutory indemnity under Section 223 against resultant losses.
  • Adamson v. Jarvis (1827) 4 Bing 66: Landmark precedent holding an auctioneer entitled to full indemnity from a client who instructed the sale of livestock to which the client possessed no title, resulting in conversion damages against the auctioneer.
Courtroom Practice & Strategic Litigation Guidance:

When an agent is sued by a third party for acts done under the principal's instructions, immediately issue a Third-Party Notice under Order VIII-A CPC (or High Court Original Side Rules) or join the principal under Order I Rule 10 CPC claiming statutory indemnification under Section 223.

Section 222 All 266 Sections of Indian Contract Act Section 224