Chapter X - Agency
Section 223
Section 223: Indemnity for good-faith acts
An agent acting in good faith may be entitled to indemnity even where the authorised act injures third-party rights.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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 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.
Rule and business relevance
The rule concerns a person employed to do an act who performs it in good faith. The illustrations include sale of goods the principal possessed but had no right to dispose of.
Limits and related provisions
Good faith and the nature of the act matter. Read the criminal-act exclusion in section 224 rather than using this provision as a general licence for unlawful conduct.
Hypothetical business example
Hypothetical example: An agent sells goods at the principal’s request without knowing the principal lacks title, and later pays the true owner. The good-faith indemnity conditions are examined.
Practical decision flow
Identify the entrusted act.
Establish the agent’s good faith and knowledge.
Trace the resulting third-party liability and check section 224.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify the entrusted act.
- Establish the agent’s good faith and knowledge.
- Trace the resulting third-party liability and check section 224.
Avoid
- Good faith and the nature of the act matter. Read the criminal-act exclusion in section 224 rather than using this provision as a general licence for unlawful conduct.
Glossary
- Good-faith act
- The act done with the good faith required by the provision.
- Third-party rights
- Rights of another person injured by the act.
Frequently asked questions
Does injury to another’s rights always defeat indemnity?
Not where the conditions of this provision are met.
Is good faith required?
Yes. It is an express condition.
Does this override the criminal-act exclusion?
No. Section 224 must be considered separately.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026