Osman Jamal and Sons Ltd. vs Gopal Purshottam
AIR 1929 Calcutta 208
Case Summary
[Cause of Action of Indemnity]
Facts
The plaintiff company entered into an agreement with the defendant firm to act as commission agents. The defendants agreed to indemnify the plaintiff against any losses arising from such transactions. The plaintiff purchased goods for the defendants through a vendor, but they failed to pay for or take delivery of the goods. Therefore, the vendor resold the goods at a lower price and sought to claim the balance from the plaintiffs.
The plaintiff being liable to the vendor, sought to recover the loss from the defendant under their indemnity clause. They also claimed the unpaid commission that would have been earned by them had the defendant fulfilled his contract.
Issues
Whether the plaintiff could claim indemnity without having made the payment to the vendor till the initiation of the suit?
Key Legal Provisions
Indian Contract Act, 1872:
Section 124 – [Contract of Indemnity] A contract where one party promises to save another from loss caused by the conduct of the promisor or any other person.
Judgement
The Court rejected the defendant's claim that the plaintiff could not claim indemnity as they had not yet paid the vendor. It was held that under equity, indemnity was not limited to reimbursement after the loss had been paid. The Court could order the indemnifier to pay the amount before the indemnified party actually makes the payment, to prevent financial strain on the indemnified.
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