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At A's direction, broker B lawfully contracts to buy ten casks of oil from C for A. A refuses delivery.…

Section 222 requires the principal to indemnify the agent against the consequences of authorised lawful acts. In illustration (b), the broker may recover the damages, costs…

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At A's direction, broker B lawfully contracts to buy ten casks of oil from C for A. A refuses delivery. C sues B, who notifies A. A repudiates the contract and B unsuccessfully defends the suit, paying damages and costs and incurring expenses. Under section 222 of the Indian Contract Act, 1872, who must bear B's resulting losses?

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Answer and explanation

Correct answer C

Section 222 requires the principal to indemnify the agent against the consequences of authorised lawful acts. In illustration (b), the broker may recover the damages, costs and expenses incurred in the unsuccessful defence.

Option feedback

Option A

The principal's indemnity duty covers consequences of the authorised lawful act.

Option B

The seller does not owe the broker the principal's indemnity under section 222.

Option C

Section 222 and illustration (b) make A liable to indemnify B for the three losses described.

Option D

The statutory illustration includes damages and costs alongside expenses.

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