The Principal’s Duty to the Agent (S-222 to 225): Loyalty or Liability?

Introduction

Being an agent can be like walking through a minefield blindfolded — you follow instructions, yet somehow, you’re the one facing lawsuits. But don’t worry, the law has your back! The principal is duty-bound to protect and indemnify the agent for lawful actions taken under their authority. Let’s explore these provisions with humor, professionalism, and illustrative clarity.

Principal’s Duty to Indemnify the Agent

1. Indemnity for Lawful Acts (Section 222)

“Follow Orders, and I’ll Have Your Back!”
When an agent acts lawfully under the authority of the principal, the principal must indemnify the agent against any damages, costs, or expenses incurred.

Illustration (a):
B, an agent in Singapore, contracts to deliver goods on A’s orders. A fails to send the goods, and C sues B. After B informs A, the principal authorizes him to defend the case. A is liable for the damages, costs, and expenses incurred by B.

Illustration (b):
B contracts to buy 10 casks of oil for A. A later refuses the purchase, and B is sued. B defends unsuccessfully and incurs expenses. A must reimburse B for all losses.

Takeaway: If the agent obeys orders and things go south, the principal picks up the tab.

2. Indemnity for Acts Done in Good Faith (Section 223)

“If It Looked Right, It Was Right!”
Even if the agent’s lawful action unintentionally infringes on third-party rights, the principal must indemnify the agent, provided the act was done in good faith.

Illustration (a):
A, a decree-holder, tells a court officer to seize B’s goods, believing they belong to B. The goods belong to C, who sues the officer. A must compensate the officer for obeying instructions.

Illustration (b):
B, at A’s request, sells goods that A has no right to sell. C sues B and recovers damages. A must reimburse B for the loss and expenses.

Key Idea: Good intentions and lawful execution shield the agent, with the principal footing the bill.

3. No Indemnity for Criminal Acts (Section 224)

“Crime Doesn’t Pay, and Neither Does the Principal!”
If the principal instructs the agent to commit a crime, the agent cannot claim indemnity for damages or consequences.

Illustration (a):
A hires B to assault C and promises indemnity. B assaults C and is sued. A isn’t liable for B’s damages or expenses.

Illustration (b):
B publishes a defamatory article at A’s request, who promises indemnity. B gets sued for libel and incurs damages. A doesn’t have to indemnify B.

Moral of the Story: If it’s illegal, you’re on your own, buddy.

4. Compensation for Principal’s Neglect (Section 225)

“Negligence Isn’t Bliss!”
The principal is liable to compensate the agent for any injury caused due to their negligence or lack of skill.

Illustration:
A employs B as a bricklayer but constructs faulty scaffolding. When the scaffolding collapses and injures B, A must compensate B for the harm.

Bottom Line: If the principal’s incompetence harms the agent, they must pay up.