Section 214 The Indian Contract Act, 1872
Section 214 of the Indian Contract Act, 1872 states:
Section 214 – Obligation of employer to indemnify agent
The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.
Explanation:
If an agent acts lawfully and within the scope of his authority, the principal (employer) must compensate the agent for any loss, damage, or liability the agent suffers as a result.
Key Points:
The act must be:
Lawful, and
Within the authority given to the agent.
If the agent suffers any loss due to such acts, the principal is legally obliged to indemnify him.
This section protects agents acting in good faith and on behalf of their principal.
Illustration:
A, an agent of B, buys goods on B’s instruction. A pays for the goods, but B later refuses to reimburse A. Since A acted under B’s authority and did nothing unlawful, B must indemnify A for the amount paid.
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