What rule about indemnity did the court stress?

Indemnity is to protect the indemnified from having to pay; payment can be demanded when loss is incurred, not only after the indemnified has first paid.

Was the plaintiff a commission agent or principal?

On the contract terms, the plaintiff acted as commission agent for the defendant; the defendant could even be liable as an undisclosed principal.

Does indemnity arise only after actual payment by the indemnified?

No. If loss is certain and liability has attached, the indemnifier must step in; the court cited English authority to support this view.

What relief was granted?

Indemnity for the loss plus commission due to the plaintiff company.

Which ICA provisions are central here?

Sections 124–125 of the Indian Contract Act, 1872 on indemnity and the rights of the indemnity holder.

Law Easy

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Osman Jamal & Sons Ltd. v. Gopal Purshottam (AIR 1929 Cal 208) — Indemnity under Sections 124–125 ICA | The Law Easy

Osman Jamal & Sons Ltd. v. Gopal Purshottam (AIR 1929 Cal 208)

Indemnity under Sections 124–125 ICA • Loss trigger vs. post-payment • Agency & commission — easy classroom explainer.

Calcutta High Court Year: 1929 AIR 1929 Cal 208 Indian Contract Act, 1872 Reading: ~7 min

Author: Gulzar Hashmi | India | Published: 23 Jul 2024

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Summary
Issues
Rules
Facts
Arguments
Judgment
Ratio
Why It Matters
Key Takeaways
Mnemonic
IRAC
Glossary
FAQs
Related

Quick Summary

This case clarifies indemnity under Sections 124–125 of the ICA. The court said indemnity is about preventing loss. The indemnifier should pay when the indemnity holder’s loss has arisen, not only after the holder first pays out of pocket. On the contract, the plaintiff acted as a commission agent, so indemnity and commission were due.

CASE_TITLE: Osman Jamal & Sons Ltd. v. Gopal Purshottam (AIR 1929 Cal 208) PRIMARY_KEYWORDS: indemnity, Sections 124–125 ICA, commission agent SECONDARY_KEYWORDS: undisclosed principal, loss trigger, Richardson Re (1911) PUBLISH_DATE: 23-Jul-2024 AUTHOR_NAME: Gulzar Hashmi LOCATION: India

Issues

Is the defendant bound to indemnify the plaintiff for losses from the supply transactions?
Did the plaintiff act as a commission agent for the defendant or as a principal?

Rules

ICA §124–125 (Indemnity): Duty to protect the promisee against loss; rights of indemnity holder include costs, damages, and sums paid under authority.
Agency Principle: A commission agent binds the principal; principal may be undisclosed yet liable.
Timing of Indemnity: Liability can arise when loss is incurred or becomes inevitable—not only after actual payment.
Reference (English Authority): Richardson Re, Ex parte Governors of St. Thomas’s Hospital (1911) supports early indemnity.

Facts (Timeline)

Timeline: commission agency agreement, default, resale at loss, claim for indemnity

Agency Contract: Plaintiff agreed to act as commission agent for defendant; defendant promised to indemnify against losses on such dealings.

Purchase: Plaintiff bought goods from Maliram Ramjidas for the defendant.

Default & Resale: Defendant did not take delivery; vendor resold at a lower price and demanded the difference from the plaintiff.

Liquidation: Plaintiff company went into liquidation; liability to vendor still stood.

Claim: Plaintiff sought indemnity for the loss and payment of its commission. Defendant said plaintiff acted as principal, and no indemnity lies until actual payment.

Arguments

Plaintiff (Company)

Acted as commission agent; defendant promised indemnity.
Loss arose when defendant failed to take delivery and resale happened at a loss.
Commission is contractually due.

Defendant

Plaintiff acted as principal, not agent; no indemnity.
No actual payment made yet, so indemnity not triggered.
Commission not payable.

Judgment

The Calcutta High Court read the contract and held that the plaintiff acted as a commission agent. The defendant, even as an undisclosed principal, was answerable. Indemnity is meant to save the promisee from loss. Therefore, the indemnifier’s duty can arise once the loss occurs or becomes fixed, even if the indemnity holder has not yet paid cash. The court relied on English authority to support this timing. Result: the defendant must indemnify the loss and pay the plaintiff’s commission.

Ratio

Indemnity aims to prevent the indemnified from paying; liability can arise at loss, not only after payment.
On true construction, a commission agent binds the principal; indemnity follows.
Undisclosed principal can be liable on the agent’s contract.

Why It Matters

For exams and practice, remember: loss triggers indemnity. Do not wait for a receipt. Also, agency language in contracts is crucial—labels decide who pays.

Key Takeaways

Indemnity protects against loss; timing is when loss arises.
Commission agents can claim indemnity and commission per contract.
Undisclosed principal may be liable.

Mnemonic + 3-Step Hook

Mnemonic: “Loss, not Payment; Agent binds Principal” → L-P-A-P.

Spot Loss: Has a real loss arisen or become fixed?
Call Indemnity: Indemnifier must step in now.
Check Agency: Commission agent? Then principal pays, including commission.

IRAC Outline

Issue: Is the defendant bound to indemnify and pay commission to a commission agent despite no prior out-of-pocket payment by the agent?

Rule: ICA §§124–125; indemnity duty arises to protect from loss; agency may bind an undisclosed principal.

Application: Contract shows agency; loss arose on resale at a lower price. Indemnity triggered; commission also due.

Conclusion: Plaintiff entitled to indemnity for loss and commission from defendant.

Glossary

Indemnity: A promise to save someone from loss caused by another’s act.
Commission Agent: An agent who buys/sells for a principal and earns a fee.
Undisclosed Principal: A principal whose identity is hidden but can still be liable on the agent’s contract.