Contract
of Agency
Asok Nadhani
When
person having capacity to contract (called Principal) enters into a
contract with another through a third person (called Agent), a contract
of agency is created.
13.1
Principal and Agent (sec. 182)
a.
Agent
i. Agent
is a person employed to do any act or to represent another
in dealings with other persons. The function of an agent is to bring his
principal into contractual relations with third persons. Thus an agent is a
connecting link between the principal and third parties.
ii. Any
person who is authorised to act as such may be an agent (sec.184). The agent
does not make contracts on his own behalf, so it is not essential for agent to
have contractual capacity. Even a minor may be an agent. If a person who is not
competent to contract is appointed an agent, the principal is liable to the
third party for the acts of the agent. It is therefore in the interest of the
principal that the agent should have contractual capacity.
b.
Principal
- Principal
is the person for whom an act is done by the agent or who is represented
by the agent in respect of dealing with third persons.
- Any person
who is of the age of majority and of sound mind, may employ an Agent. So,
the person employing an agent must be capable to enter into a contract.
So, a lunatic, minor or a drunken person cannot employ an agent (sec.183)
13.2
Principles of Agency
The
concept of Agency is based on 2 major principles:
1. Except
of an act of personal nature (e.g., marriage) or annexed to a public
office (e.g., that of a magistrate), a person can do anything through an
agent, what he can do personally.
2. The
person acting through an agent is doing it himself. So, the acts of an
agent, subject to certain conditions, are acts of the principal and contracts through
Agents have the same legal consequences as if the contracts had been entered by
and the acts are done by the principal himself in person. Ex.13.1
13.3
Elements of Agency
i. Agreement. An
agency is based on agreement (but not necessarily a contract) between the
principal and third persons. (sec. 182)
ii. Any person may become agent:
Even person incapable to contract (like minor or a person of unsound mind) may even
be an agent (the principal is, however, liable for the acts of such an agent).
iii. No Consideration necessary: Consideration
is not essential to create an agency so far an agreement exists between the
Principal and Agent (sec. 185)
iv. Intention to act for principal: There must be an intention on part of
the agent to act on behalf of the principal to create a relationship of agency.
v. Interest
on Principal: The agent must take all reasonable steps for the protection
and preservation of the interests entrusted to him. (sec.209)
vi. Principal liable for acts of agent: The principal is liable for all the acts of
an agent which are lawful and within the scope of agent’s authority.
The contracts entered into by the agent on behalf of
the principal have the same legal consequences as if these contracts were made
by the principal himself. [Edmunds vs Bushell &
Jones]
13.4
Creation of Agency
Agency
may be created through following modes:
1. Express
agreement
2. Implied
agreement
3. Ratification
4. Operation of
law.
13.4.1
Express agreement
Normally
the Principal gives an express authority to the Agent to act on his
(principal’s) behalf and to bind the principal within the scope of his
authority. The agent may be appointed either by word of mouth or by an
agreement in writing (normally through formal instrument called power of
attorney on a stamped paper). (sec.187)
13.4.2
Implied agreement
a. An
agency may be inferred from the conduct, situation, circumstances or
relationship, even without any express agreement. (sec.186,187) Ex.13.2
b. Implied
agency arises when the principal conducts himself towards the person alleged to
be the agent or the third parties in such a manner, as if the principal had
conceded to the appointment of that person as agent. It includes:
i. Agency by estoppel (sec.237) When an agent has, without
authority, done acts or incurred obligations to third party on behalf of his
principal inducing to believe that such acts and obligations were within the
scope of the agent's authority, the principal cannot deny the agency and is
bound by such acts or obligations of the agent. [Darbari Lal vs Sharif
Hussain], [Truman v. Loder], Ex.13.3
ii. Agency by
estoppel arises when a person holds himself out as Agent, i) though in fact he
is not so or ii) even after he ceased to be an agent.
[Truman vs Loder]
iii. Agency by holding out: Agency by holding out is a kind of agency by estoppel. In
this case, a prior positive or affirmative act on the part of the principal
establishes the relationship of agency subsequently Ex.13.4
iv. Agency by necessity: In
certain urgent circumstances, the law confers an authority on a person to act
as agent for the benefit of another, there being no opportunity of
communicating to the other. Such agency is called an 'agency of
necessity'. It arises in the following cases:
Ex.13.5
a. Agent
exceeding his authority in an emergency (sec. 189):
When an agent exceeds his authority in an emergency, an agency of necessity
arises provided the agent (i) was not able to communicate with the principal,
(ii) had taken all reasonable steps to protect the interests of the principal,
and (iii) had acted bona fide. In
such a case the principal is liable for the acts of the agent. Ex.13.6, Ex.13.7,
Ex.13.8
In case of
emergency during voyage, the master of a ship may borrow on the shipowner's
credit, hypothecate the ship, cargo and freight, or sell whole or a part of the
cargo. [Great Northern Rail vs Swaffield], [Sims & Co.
v. Midland Rail. Co. ].
b.
Husband and Wife: If
the husband does not make adequate provision for maintenance of his wife, the
wife is entitled to pledge his credit for necessaries (goods and services
normally required in couple's joint style of living).
If
the husband & wife lives together, the husband may escape liability if he
can prove that (i) he has expressly-forbidden his wife to pledge his credit, or
(ii) the goods purchased are not necessaries, or (iii) he has allowed
sufficient funds for purchasing the articles she needed to the knowledge of the
tradesman, or (iv) the tradesman has been expressly told not to give
credit to the wife. Where the wife has been deserted by her husband (unless the
wife lives separately on her own will and without justification), the wife has
authority to pledge her husband's credit for necessaries.
13.4.3
Agency by Ratification
i. Sometimes
a person may act on behalf of another without his knowledge or consent and the
Principal may ratify the agent’s act. (Sec. 196 to 200) Ex.13.9, Ex.13.10
For example, A
may act as P’s agent though he has no prior authority from P. In such a
case P may subsequently either accept the act of A or reject it. If P accepts
A’s act, P is said to have ratified the agency. Likewise, when an agent exceeds
the authority bestowed upon him by the principal, the principal may ratify the
unauthorised act. [Hukumchand
insurance Co. v. Bank of Baroda], [Cornwal vs Wilson
ii.
Ratification
may be express or may be implied in the conduct
of the person on whose behalf the acts are done (Sec.197) Ex.13.11, Ex.13.12,
Ex.13.13, Ex.13.14
iii.
Ratification may be done for an act by
agent in excess of his authority.
13.4.3.1
Effect of Ratification (Sec. 196)
i.
Ratification render the acts done by
one person (agent) on behalf of another (principal), without his (principal's)
knowledge or authority, binding on the other person (principal) as if they had
been performed by his authority.
ii.
Ratification tantamounts to prior authority. It
means that agent’s authority to bind the principal is presumed to come into
existence not from the date of ratification but from the date when the agent
first contracted on behalf of the principal (without authority). Thus,
ratification is an authorisation which has retrospective effect with prior
authority. So, it is also called ‘ratification tantamount to acceptance’. [Bolton Partners v. Lambert], [Balton Partnerss vs Lambert], Ex.13.15
13.4.3.2
Requisites of valid ratification (Sec. 198 to 200)
i.
The agent must purport to act as agent
for a principal Ex.13.16
ii.
The principal must be in existence at
the time of contract [Mohamad Taquiddin vs Ghulam Mohammad], Ex.13.17
iii.
The principal must have contractual
capacity at the time of the contract and also at the time of ratification.
iv.
Ratification must be with full
knowledge of facts. (sec.198) [Fitzmaurice v. Bayley], [Damodharan
Dass vs Sheoram Dass], Ex.13.18,
Ex.13.19
v.
Ratification must be done within a
reasonable time. Ratification done after the expiry of
the reasonable time is not valid.
vi.
The Ratified act must be lawful. An
agreement which is void ab initio cannot be ratified. [Mulamchand
vs State of M.P]
vii.
The whole transaction can be ratified (Sec.
199). The ratification of an action or its rejection must be in toto (entirely,
wholly).
viii. Ratification
must be communicated to the party who is sought to be bound
by the act done by the agent
ix.
The principal should have power to
do the acts which are sought to be ratified.
x.
Ratification should not put a third
party to damages. Ratification, which has the effect of
subjecting a third person to damages or of terminating any right or interest of
a third person, is invalid. Ex.13.20, Ex.13.21
xi.
Ratification
is effective from the date of the act of the agent. Ex. 13.22
13.4.4
Operation of Law
Sometimes
an agency arises by operation of law. For example, when a company is formed,
its promoters are its agents by operation of law. A partner is the agent of the
firm for the purposes of the business of the firm, and the act of a partner done
to carry on the business of the firm in usual way, binds the firm.
13.5 Agency coupled with interest
i. 'Agency coupled with
interest' means Agency created:
a.
For securing some benefit to the agent over and
above his remuneration as an agent.
b.
Where the agent himself has an interest in the property
which forms the subject
matter of agency.
ii. Characteristics of Agency coupled with Interest:
a.
The interest should exist at the time of creation of
agency (purpose of creation of agency is to protect the interest of
agent). If the interest arises after the creation of agency then it is not an
agency coupled with interest.
b.
Agency coupled with interest cannot be terminated to the
prejudice of such interest, unless there is a contract to the contrary.
c.
Agency coupled with interest does not terminate even on
the death, insolvency or insanity of the principal.
d.
Such agency is irrevocable to the extent of such
interest.
Example.
P engages A to sell P's house and to pay himself (in respect of a debt due
to A from P) out of the proceeds of the sale. This is agency coupled with
interest. Therefore, P cannot revoke A's authority to sell the house. Even on death, insolvency or insanity of P, the agency is not
terminated.
13.6
Irrevocable agency
When
an agency cannot be terminated or put an end to, it is said to be an
irrevocable agency.
An
agency is irrevocable in the following cases:
1. Where the agency is coupled with interest. Where
the agent has himself an interest in the subject matter of the agency, the agency cannot, in the absence of
an express contract, be terminated to the prejudice of such Interest. (s.202) Ex.13.23
2. The
above rule applies only if the agency is created for the protection of the
interest of the agent. It does not apply where the interest arises after the
creation of the agency. Ex.13.24
3. Where the agent has incurred a personal liability. Where
an agent incurs a personal liability, principal cannot revoke the agency
leaving the agent exposed to the risk or liability he has already incurred.
4. Where the agent has partly exercised the authority. The principal
cannot revoke the authority given to his agent after the authority has been
partly exercised. (sec.204). Ex
13.25, Ex.13.26
13.7
Termination of Agency (sec.201)
An
agency may come to an end in any of the following ways :
i. By
the Parties
a. By
Agreement
b. By
Revocation
-
Revocation by Principal
-
Revocation by Agent
ii. By
Operation of Law
-
Performance or impossibility
-
Expiry of Time
-
Death of either party
-
Insanity of either party
-
Insolvency of either party
-
Destruction of subject matter
-
Principal becomes alien enemy
-
Dissolution of a Company
-
Termination of sub agent’s authority
13.7.1
Termination of Agency by the Parties
i.
Agreement. It
may be terminated at any time and at any stage by the mutual agreement between
the principal and the agent.
ii.
Revocation by the principal. The principal
may revoke the authority of the agent at any time before the agent has
exercised his authority to bind the principal (unless the agency is
irrevocable) (s.203). But if the act is begun, the authority can only be
revoked subject to any claim which the agent may have for breach of contract.
Where the agency is a continuous one, notice of termination of agency must be
given to the agent and the third parties.
a.
If the agency is coupled with interest, the principal
cannot revoke agent’s authority to the prejudice of such interest.
b.
When agency is for fixed period, the principal must make
compensation to the agent for premature revocation of agency without sufficient
cause.
c.
Revocation may be expressed or implied from the conduct
of the principal. Ex.13.27, Ex.13.28
d.
The termination of authority of an agent does not take
effect (s.208)-
§ the agent, before it
becomes known to him;
§ third persons, before
it becomes known to them.
iii. Revocation by the agent.
a. An
agency may also be terminated by an express renunciation by the agent after
giving a reasonable notice to the principal.
b. Revocation
and renunciation may also be implied by the conduct of the principal or agent
respectively (sec.207) [Azam Khan v. S. Sattar ].
c. Where
there is an express or implied contract for the agency to be continued for a
specified period, the principal must make compensation to the agent, or the
agent to the principal, as the case may be, for any revocation or renunciation
without sufficient cause. (sec.205)
d. Reasonable
notice must be given of such revocation or renunciation (sec.206) otherwise the damage
thereby resulting to the principal or the agent, as the case may be, must be
made good to the one by the other.
13.7.2
Termination of Agency by operation of law (Sec. 201)
i. Performance or impossibility. Where
the agency is for a particular object, it is terminated when the object is
accomplished or when the accomplishment of the object becomes impossible.
ii. Expiry of time. When
the agent is appointed for a fixed period of time, the agency comes to an end
after the expiry of that time even if the work is not completed.
iii. Death or insanity. When
the agent or the principal dies or becomes of unsound mind, the agency is
terminated. In such situation, on behalf of the representatives of the principal,
all reasonable steps should be taken by the agent for preservation of property.
(s.209)
iv. Insolvency. The
agency automatically gets terminated on insolvency of the principal.
v. Destruction of subject-matter. An
agency gets terminated when the subject matter of the agency gets destroyed.
vi. Principal becoming an alien enemy. When
the agent and the principal belong to alien countries, the contract of agency is
terminated.
vii. Dissolution of a company. When
a company (either principal or agent) is dissolved, the automatically comes to
an end.
13.8
Characteristics of an Agent
a.
Any person authorised to act may be an
agent (sec.184). Even a minor may be an agent. If the agent is incompetent to
contract, the principal is liable to the third party for the acts of the agent.
b.
The essential characteristics
of an Agent is that he can :
-
bind the principal into legal relations
with the third person,
-
make the principal answerable to third
parties
-
establish a privity of contract between
the third person and the principal.
13.8.1 Principal acting through agent is
himself acting
i.
The principal employs an agent and authorizes the agent
to represent him or act on behalf of him to create contractual relations with
third parties. So, when the agent acts within the scope of his authority,
and in the name of the principal, it is deemed in law that the principal
himself has acted, and not the agent. Consequently the principal becomes bound
by the acts of the agent. Thus, for all legal purposes, the acts of the agent are
the acts of the principal.
ii.
However, the contracts involving personal performance,
personal skill cannot be conducted through an agent. e.g. An agent cannot be
employed to sing on behalf of his principal.
13.9
Distinction between Agent and independent contractor
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Agent
|
Contractor
|
|
a.
An agent can act only within the
scope of the authority given to him.
|
a.
An contractor works
Independently of principal’s control or interference.
|
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b. An
agent only represents his principal in dealings with third persons and is not
personally liable for acts done by him within the scope of his authority.
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b.
An independent contractor is
personally liable for all acts done by him.
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13.10
Distinction between Agent and Servant
i. An
agent creates legal relations between principal and third persons or to
represent him in dealings with third persons. A servant does not necessarily create
such legal relationship between the
employer and third persons
ii. Agent
should follow all the lawful instructions of the principal but he is not
subject to the direct control and supervision of the principal. A Servant acts
under the direct control and supervision of-his employer and is bound to follow
all reasonable orders given to him in the course of his employment.
iii. An
agent may work for several principals at the same time, but a servant usually
serves only one master.
iv. A
principal is liable for the acts of agent done within the scope of his
authority. A master is liable for the acts of the servant committed in the course
of his employment.
v. A principal is liable
for wrongful acts of his agent done by the agent within the scope of his
authority. An
employer is liable for the wrongs of his servant only when they have been done
in the course of his employment.
vi. An agent is paid by
way of commission on the basis of work done. A servant is paid by way of salary
or wages.
13.11
Classification of Agents
Agents
may be classified as :
§ As
per authority
-
Special Agent
-
General Agent
-
Universal Agent
§ As
per nature of work
-
Merchantile or Commercial agents
- Factor,
- Auctioneer,
- Broker,
- Commission
Agent,
- Del
- Banker
-
Non Merchantile Agent
§ As
per Appointment
-
Pretended Agent
-
Sub Agent
-
Substituted Agent
13.12
Classification of Agents as per Authority
1. Special agent. A
special agent is one who is appointed to perform a particular act or to
represent his principal in some particular transaction as (e.g to sell a particular
house). Such an agent has a limited authority and as soon as the act is
performed, his authority comes to an end. He cannot bind his principal in any
matter other than that for which he is employed. The persons who deal with him
should ascertain the extent of his authority.
2. General agent. A general
agent is one who has authority to do all acts connected with a particular
trade, business or employment. For example, the manager of a firm has an
authority to bind his principal by doing anything necessary for carrying on the
business of the firm within the ordinary course of the business. Such authority
of the agent is continuous until it is put to an end.
3. Universal agent. A
universal agent is one whose authority to act for the principal is unlimited.
He has authority to bind his principal by any act done by him which is legal
and does not violate the law of the land.
13.13
Classification of Agents as per nature of Work
As per nature of work, agent may
again be classified as
-
Mercantile or Commercial Agents.
-
Non Mercantile Agents.
13.13.1
Commercial or mercantile agents
A
mercantile agent normally has the authority to perform normal commercial
transactions like selling & buying of goods, raise money and related duties
like :
a. Factor: A Factor is a
mercantile agent entrusted with the possession of goods for the purpose
of selling them. He has ostensible authority to do such things as are usual in
the conduct of business. He can sell them on credit as well. He has the
authority to receive the price and give a good discharge to the purchaser.
A factor has a
general lien on the goods of his principal for a general balance of account
between him and the principal. If he is in possession of goods, or of the
documents of title to goods, with the consent of the owner, any sale,
pledge or other disposition of them made by him, in the ordinary course of
business. is binding on the owner, whether or not the owner authorised it. Ex.13.29
b.
Auctioneer. An acutioneer
is an agent appointed by a seller to sell his goods by public auction for a reward
(generally in the form commission). He is primarily the agent of the seller,
but after the sale has taken place, he becomes the agent of the
purchaser also. He resembles a factor in all respects except that he has only a
particular lien on the goods for his charges. He has authority to receive the
price of the goods sold. He can also sue for the price in his own name. The
principal is liable to the third parties for the acts of the auctioneer if the
auctioneer acts within the scope of his apparent authority (even though he
disobeys instructions privately given to him). Ex.13.30
If the
auctioneer declares a reserve price but by mistake knocks the article down at a
price below the reserve price, the sale is not binding on the owner.
c. Broker. A broker is an agent who is
employed primarily to bring about a contractual relation between the principal
and the third parties. He cannot act or sue in his own name. He is not
entrusted with the possession of the goods in which he deals. And as he has no
possession, he has no right of lien.
d. Commission agent. A
commission agent is employed to buy and sell goods, or make business
transaction generally for other persons for consideration for his remuneration
(called commission).
e. Del del
f. Banker: The
relationship between a banker and his customer is really that of debtor and
creditor. The banker has an additional and ostensible obligation to pay the
customer when called upon to do so (through draft / cheque). In that
respect, the banker acts an agent of his customer.
13.13.2
Non-mercantile agents
These
include various professionals performing services on behalf of the principal (other
than sale & purchase of goods) like attorneys, solicitors, insurance
agents, clearing and forwarding agents.
13.14
Classification of Agent as per Appointment
As per appointing authority, agent may be classified
as :
i. Sub Agent : A person employed by the original
agent and acting under his control.
ii.
Substituted
Agent : A person named
by the agent, to act for the principal, on authority from the principal.
iii.
Pretended
Agent : A person untruly
representing himself to be agent of another.
13.14.1
Sub Agent
i. Principal
appoints a particular agent to act on his behalf, relying upon the agent's
skill, integrity and competence. So, an agent normally cannot delegate his
authority to another person without the consent of his principal. (s. 190)
ii. However,
in the following case, an agent may appoint another person (normally known as
sub agent) to delegate his work :
a.
There is a custom of trade to that
effect Ex.13.31
b.
The nature of work is such that a
sub-agent.is necessary. Ex.13.32
c.
Where the principal is aware of the
intention of the agent to appoint a sub-agent but does not object to it
d.
Where unforeseen emergencies arise
rendering appointment of a sub-agent necessary.
e.
Where the act to be done is purely
ministerial not involving confidence or use of discretion.
f.
Where power of the agent to delegate
can be inferred from the conduct of both the principal and the agent.
g.
Where the principal permits appointment
of a sub-agent.
iii. A
sub-agent is a person employed by the original agent and acting under his
control (s.191). Thus he is the agent of the original agent and so relation of
the sub-agent to the original agent as between themselves is that of the agent
and principal (s.194).
a.
The principal is bound by the acts of the sub Agent if he
is properly appointed by the principal.
b.
The original Agent is responsible for the acts of
Sub-Agent.
13.14.2
Co-Agent or substituted agent
a. A
co-agent or a substituted agent is a person who is named by the agent, on an
express or implied authority from the principal, to act for the principal. He
is not a sub-agent but an agent of the principal for such part of the business
of the agency as is entrusted to him. Ex.13.33, Ex.13.34
b. The
agent should exercise the same amount of discretion in selecting a co-agent for
his principal as a man of ordinary prudence would exercise in his own case. If
he does so, he is not responsible to the principal for the act or negligence of
the co-agent (s. 195).
c. There is privity of
contract between the principal and the substituted agent. The substituted agent
is an agent of the principal and so is directly responsible to the principal
for his acts.
d. The substituted agent
is not responsible for his acts to the agent. Similarly, the agent is not
responsible to the principal for the acts of substituted
agent.
13.14.3
Pretended Agent
A
person may sometimes untruly represent himself to be the authorised agent of
another, and thereby induce a third person to deal with him as such agent. In
such case, the rights/representatively of such Agent, Principal and third party
as are follows:
-
If the alleged principal ratified act
of pretended agent, an Agency of Ratification emerges and the principal becomes
bound by the acts of the pretended agent.
-
If his alleged employer does not ratify
his acts, such person is liable to make compensation to the third person in
respect of any loss or damage which he has incurred by so dealing. (sec.235)
-
While the third person has the right to
claim compensation from the pretended agent, the agent has no right to proceed
against that person for the contract. (sec.236)
13.14.4
Responsibility of Agent for Acts of sub-agent
i. Responsibility
of Agent when Sub-agent is properly appointed
(s.192)
a.
The principal is bound by the
acts of the sub-agent as if the sub-agent were an agent originally appointed by
the principal.
b.
The agent is responsible to the
principal for the acts of the sub-agent. [Jugaldas
v. Harilal], Ex.13.35
c.
The sub-agent is responsible for his
acts to the agent, but not to the principal except in case of fraud or wilful
wrong.
d.
There is no privity of contract between the sub-agent and
the principal. Therefore, the sub-agent cannot sue the principal for
remuneration. Similarly, the principal cannot sue the sub-agent for any money
due from him. However, the sub-agent is shall be liable to the principal in
case of fraud or willful wrong.
ii.
Responsibility of Agent when Sub-agent is not properly appointed (s.193)
Where an agent,
without having authority to do so, has appointed a sub-agent:
b.
agent is responsible for the acts of the
sub-agent to the principal and to the third parties
c.
sub-agent is responsible to the agent.
d.
principal is not responsible for the
acts of the sub-agent
e.
sub-agent is not responsible to the
principal
13.14.5
Difference between sub-agent and substituted agent
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Sub-agent
|
Substituted agent
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1. Works
under the control of the agent
|
Works
under the instructions of the principal.
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2.
There is no privity of contract
between a sub-agent and the principal.
The
principal cannot sue the sub-agent directly for any amounts or money.
Similarly, a sub-gent cannot sue the principal for his remuneration. Both the
principal and the sub-agent can sue the agent.
|
There
is a privity of contract between him and
the
principal Substituted agent & principal may sue each other.
|
|
3. The
agent is responsible to the principal for the acts of the sub-agent.
Sub Agent is
not directly answerable to the principal.
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Substituted
agent is not responsible for his acts to he agent. Agent is not responsible
to the principal for any act or negligence of the substituted agent.
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13.14.6 Distinction
between General Agent & Special Agent
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Special Agent
|
General Agent
|
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A special agent is
appointed to perform a particular act or to represent the principal in some
particular transaction.
|
A general agent is
appointed to do all acts connected with a specified trade, or assignment.
|
|
A special agent has
limited authority. He cannot bind the principal in any matter other that for
which he is employed.
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A general agent has
the authority to bind his principal with all the acts connected with the
specified trade or assignment for which he is authorised.
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The authority of the
special agent comes to an end as soon as the act for which he is appointed,
is completed.
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The authority of the
general agent is continued until it is put to an end.
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13.15
Duties and Rights of Agent
A
contract of agency gives rise to several duties and obligations on part of
Agent
13.15.1
Duties of Agent
An
agent owes a number of duties to his principal according to the nature of
agency, as
summarised
below :
i.
Carry out
the work (sec. 211): He
should carry out the work as per specific direction of the agent or according
to usual customs prevailing in such business. Otherwise, he would be liable to
compensate any loss suffered by the principal and account for the profit. The
principal may even terminate the agency if he disregards the principal. [Pannalal Jankidas v. Mohanlal], Ex.13.36,
Ex.13.37, Ex.13.38, Ex.13.39
An agent may
disobey his principal's directions where he is privileged to protect his
interest.
ii.
Work with
care (sec. 212): An agent should conduct the business of
the agency with as much skill as is generally employed in similar business,
unless the principal knows about his deficiency in skill. He will be
responsible for any loss to the agent, in direct consequence of his neglect,
want of skill or misconduct (but is not liable for loss or damage which is
indirectly or remotely caused). [Surajmal vs Fateh Chand], [Kimber vs Barber], Ex.13.40, Ex.13.41, Ex.13.42
iii. Proper Accounts (sec.213): An agent is bound to
render proper accounts to his principal on demand.
iv. Communicate (sec.214): It is the duty of an
agent, in cases of necessity & difficulty to use all means of communication
with his principal to seek his instructions.
v.
Principal’s
deals not on own account (sec.215):
If the agent deals on his
own account in the business of the agency without prior consent of the
principal and disclosing all material facts,
a. the
principal may repudiate the transaction,
b. claim
the benefit, if any, acquired by the agent on account of such transaction (sec. 216). Ex.13.43
vi.
Pay the
moneys to the principal (sec. 218): The agent must pay to his principal all sums received on
his account. He may deduct there from all moneys due to himself arising out of
transactions made on behalf of the principal.
vii. Protect and preserve the Principal’s interests (sec. 209): When
an agency is terminated by the principal’s death, insolvency or becoming of
unsound mind, the agent is bound to take, on behalf of the representatives of
his principal, all reasonable steps for the protection and preservation of the
interests entrusted to him.
viii. Use of information. The
agent must compensate any loss suffered by the principal, if the agent uses any
information about the principal against the interest of principal. The
principal may also restrain the agent from using such information by an
injunction.
ix. Secret profit. As the agent occupies fiduciary position, he
should not make any profit beyond the agreed commission or remuneration,
without the knowledge of the principal. If he makes any additional profit, he
must pay it to the principal. [Andrews v.
Ramsay & Co.], Ex.13.44, Ex.13.45,
Ex.13.46
In case of
agent making secret profit, the principal may
a. recover
the amount of the secret profit from the agent;
b. refuse
to pay the agent his commission or remuneration ;
c. dismiss
the agent without notice ;
d. repudiate the contract with the other party.
x.
Adverse
title: An agent must
not set up his own or third person’s title to the goods
received from
the principal on account of agency, unless it makes a better title for him.
xi. Conflict of interest & duty: The agent must not put himself
in a position where his duty to the principal and his personal
interest conflict unless he has made full disclosure of his interest to his principal,
specifying its exact nature and obtained his assent. [Armstrong v. Jackson
xii. Not to delegate authority (sec.190): An agent must not
depute another person to do what he should have done himself personally,
without the consent of the principal.
13.15.2
Rights of Agent
An
agent has the following rights against the principal :
i.
Right to
Retain (sec.217):
Out of sums received on account of the principal in the business of the
agency, the agent may retain moneys due to himself in respect of his
remuneration and payments made by him in conducting such business.
ii.
Right to
receive remuneration (sec.219).
a. The
agent is entitled to his remuneration. In the absence of any special contract,
payment for the performance of any act is not due to the agent until the completion
of such act. [Green vs. Barlett], [Andrews vs
Ramsay & Co], [Sheikh Farid Baksh vs Hargulal
Singh], Ex.13.48,
Ex.13.49, Ex.13.50
b. An
agent who is guilty of misconduct in the business of the agency is not entitled
to any remuneration in respect of that part of the business having been
misconducted. (sec. 220)
Ex.13.51, Ex.13.52, Ex.13.53
iii. Right of lien. (sec. 221): An
agent is entitled to retain goods, papers and other property, whether movable
or immovable, of the principal received by him, until the amount due to himself
for commission ( unless agreed to the contrary) and services has been paid or
accounted for to him. Such Lien of the agent is a particular lien and is
confined to claims arising in connection with the goods or property in respect
of which the right is claimed. An agent may have a general lien extending to
all claims arising out of the agency, by a special contract. [Chidambaram
vs T S Sugar Mills Co.,
Ltd.]
iv. Right of indemnification. (sec. 222)
a.
The agent has a right to be indemnified
against the consequences of all lawful acts done by him in exercise of the
authority conferred upon him. Ex.13.54
b.
The principal is not responsible any
illegal act done by the agent, even if it is done as per principal’s
instruction. Ex.13.55, Ex.13.56
c.
where one person employs another to do
an act, and the agent does the act in good faith, the agent can claim to be
indemnified against the consequences of that act, even though it causes an
injury to the rights of a third person (Sec.
223). [Bhowrilal vs State of
Assam], Ex.13.57,
Ex.13.58
v.
Right of
compensation. (sec. 225): The agent has a right to be compensated
for injuries sustained by him by neglect or want of skill on the part of the
principal. Ex.13.59
vi.
Right of
stoppage in transit. The agent
acquires the right to stop the goods in transit (like an unpaid seller) where,
a. the
agent has bought goods for his principal by incurring a personal liability, in
respect of the money which he has paid or is liable to pay.
b. the agent is personally liable to the
principal for the price of the goods sold, on the insolvency of the buyer.
vii. Ostensible authority: When an agent is employed
for a particular business, persons dealing with him can presume that he has
authority to do all such acts as are necessary to such business (s.188). Such
authority is called ostensible authority. In case the acts of an agent are in
excess of his actual authority but within his ostensible authority, the
principal is bound by such acts of the agent. [Luxor Eastbourne )
Ltd vs Cooper ], [Ryan vs
Pilkingto]
13.15.3 Agent exceeding authority
i. The principal employs
an agent and authorizes the agent to represent him or act on behalf of him to
create contractual relations with third parties. So, when the
agent acts within the scope of his authority, and in the name of the principal, it is deemed in law that the principal
himself has acted, and not the agent. Consequently the principal becomes bound by the acts of the agent. Thus, for all
legal purposes, the acts of the agent are the acts of the principal.
ii. When the agent exceeds
his authority:
a.
The principal is bound by that part of the work which is
within his authority, that can be separated from the part which is beyond his authority. (Sec.227)
b.
The principal may repudiate the whole of the transaction
if the part "beyond the scope of his authority” cannot be separated
from the part ‘within authority’. (Sec.228)
c.
Where the agent has exercised his authority partly (Sec.
204):
Where the agent has partly
exercised the authority, the principal cannot revoke the authority in respect
of obligations arising from acts already done in the agency.
For example, P authorises A to buy 20 bags of sugar and sell them entitling A to commission of 5% on the sale
price. A buys the sugar in the name of P. Since, A has
already acted (exercised his authority partly), the agency cannot be
revoked.
iii. When the Agent Acts
fraudulently:
The principal is
liable for the misrepresentations made or frauds committed by the agent in the
course of his business for the principal. However, misrepresentations made or
frauds committed by the agent in matters, which do
not fall within his authority, do not affect his principal.(Sec.238) [Dinabandhu vs Abdul Latif], [National Bank of Lahore
Limited vs Sohal Lal Saigal]
Examples.
a.
P, being owner of a ship and cargo, authorised A to
procure an insurance on the ship. A procured a policy on the ship, and another on the cargo. P is bound to pay the
premium for the policy on the ship, but not for the policy on the Cargo.
b.
P authorises A to buy 10 sheep for him. A buys
10 sheep and 20 lambs for lump sum of Rs. 6,000. P may repudiate
the whole transaction.
13.15.4
Termination of agent's authority
i.
Termination Agent’s authority :
-
As for the agent : when it becomes
known to the agent,
-
As for the third persons : when it
becomes known to them
ii. Termination of sub-agents authority (sec.210)
The sub-agency
is terminated as soon as the main agency is terminated.
iii. Termination of substituted agent’s authority.
The authority
of the substituted agent will not automatically be terminated if the authority
of the agent is terminated. Ex.13.60, Ex.13.61
13.16
Personal Liability of Agent
a. The
general rule is that only the principal can enforce, and can be held liable on
a contract entered into by the agent. (sec.230).
b. An
agent, however, can be personally liable in the following cases:
i.
Expressly
stated in contract. The agent
becomes personally liable where contract expressly contains such clauses.
ii.
When the
agent acts for a foreign principal.
When the contract is made by an agent for the sale or purchase of goods for a
merchant residing abroad, the agent is personally liable. He can exclude his
personal liability by express provision to this effect in the contract. If he
does so, he cannot be sued on the contract.
iii. When agent acts for an undisclosed principal.
Where an agent acts for an undisclosed principal, he is personally liable. The
principal, on being discovered, is also liable to third parties. [Trilok Chand vs Rameshwar Lal]
iv. When agent acts for a principal incompetent to
contract. Where the principal is incompetent to enter into a
contract (e.g minor), the agent is personally liable.
v.
Where agent
signs a contract in his own name. An
agent who signs a contract in his own name without qualification (i.e without
disclosing that he is acting as an agent), though known to be an agent, is
understood to have contracted personally. Ex.13.62
vi. Where agent acts for a non existent principal. This
is a rather peculiar case. The promoters of a company, yet to be incorporated,
sometimes enter into contracts on behalf of the company, though in such a case
the alleged principal (i.e., the company) has no legal existence till
the time of incorporation. In such a case the promoters are held to have
contracted on their own account and are personally liable.
vii. Where agent acts without authority. Where
a person acts as an agent but has no authority (or exceeds his authority), he
is personally liable for breach of warranty of authority to the third party.
viii. Where he receives or pays money by mistake or fraud. Where
an agent receives money from a third party by mistake or fraud, he is
personally liable to the third party. Likewise, he has the right to sue the
third party for the recovery of the money where he has paid it by mistake or
under fraud of the third party.
ix. Where his authority is coupled with interest. In
such a case, he may sue, or be sued, only to the extent of his interest in the
subject-matter.
x.
Where the
trade usage or custom makes him personally liable. Where
there is a trade usage or a custom making the agent personally liable, he is
liable unless there is a contract to the contrary.
xi. Where the principal is
disclosed but cannot be sued, e.g., foreign sovereigns, ambassadors etc.
xii. Where the agent signs
a negotiable instrument without specially mentioning therein that he is acting
as an agent.
xiii. Where a Government
servant enters into a contract on behalf of the Central Government in disregard
of Articles 299(1) of the Constitution of India.
13.16.1
Right of person dealing with agent personally liable (sec.233)
-
Where the agent is personally liable, a
person dealing with him may hold either Agent or his principal, or both of
them, liable. Ex.13.63
-
When a person who has made a contract
with an agent induces the agent to act upon the belief that the principal only
will be held liable, he cannot afterwards hold the agent liable.
-
If he induces the principal to act upon
the belief that the agent only will be held liable, he cannot afterwards hold
the principal liable. (sec.234)
13.17
Duties and rights of principal
In a
contract of agency, the principal also has certain obligations and rights
13.17.1
Duties of Principal
The
duties of a principal towards his agent are the rights of the agent against the
principal. The principal owes the following duties to an agent:
i.
To indemnify
the agent against the consequences of all lawful acts. The
principal is bound to indemnify the agent against the consequences of all
lawful acts done by such agent in exercise of the authority conferred upon him.
(Sec. 222)
ii.
To indemnify the agent against the consequences of acts done in good faith. 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 causes an injury to the rights of a third person (Sec. 223).
Where, however, any person employs another to do an act which is criminal, the
employer is not liable to the agent, either upon an express or an, implied
promise, to indemnify him against the consequences of that act. (Sec. 224)
iii.
To indemnify
agent for injury caused by principal's neglect. The
principal must make compensation to his agent in respect of injury caused to
such agent by the principal's neglect or want of skill (Sec. 225).
iv.
To pay the
agent the commission or other remuneration agreed.
13.17.2
Rights of Principal
The
principal, the principal has the following remedies against the agent (the
right of principal are similar to duties of Agents) :
i.
Recover
damages. The principal can recover damages from
the agent on account of any loss caused by the act of agent, due to disregard
of the directions of the principal, or by not following the custom of trade in
the absence of directions by the principal, or where the principal suffers due
to lack of requisite skill, care, or diligence on the part of the agent.
ii.
Recovery of
secret profits. If the
agent, without the knowledge and assent of the principal, makes any secret
profits out of the agency, the principal has the right to recover them from the
agent. The agent also forfeits his right to any commission in respect of the
transaction.
iii.
Termination
of Agency. The principal may even terminate
the agency if the Agent disregards the principal.
13.18
Position of Principal
As
per relationship with third parties, position of principal may be classified
as:
-
Known Principal
-
Unnamed Principal
-
Undisclosed Principal
13.18.1 Known
Principal
i. Where
the principal is known to third parties, there may be following situations :
-
Agent acts within his authority
-
Agent exceeds his authority
-
Agent acts fraudulently
ii. Agent acts within his authority :
The principal is liable for the acts of the agent with third persons provided
his acts are done within the scope
of his authority, and in the course
of his employment as an agent (sec.226). He is also liable for such acts of
the agent which are necessary for the proper execution of his (agent's)
authority. Ex.13.64
iii.
Agent
exceeds his authority.
a.
When an agent exceeds his authority to
do work of the principal, the principal is bound by that part of the work which
is within his authority and which can be separated from the part which is
beyond his authority (sec.227)
Ex.13.65
b.
Where an agent exceeds his authority,
the principal may repudiate the whole of the transaction if what he (the agent)
does "beyond the scope of his authority” cannot be separated from the rest
(sec.228) Ex.13.66.
iv. Agent Acts fraudulently. The
principal is liable for the misrepresentations made or frauds committed by the
agent in the course of his business for the principal. However,
misrepresentations made or frauds committed by the agent in matters, which do
not fall within his authority, do not affect his principal (sec.238) [Blackburd,
Lowe Co. v. Haslam], Ex.13.67, Ex.13.68,
Ex.13.69.
13.18.2
Unnamed Principal
When
a person contracts as an agent for a principal but does not disclose
Principal’s name, the principal is liable for the contract of the agent, unless
there is a trade custom or a term which makes the agent personally liable. If
the third party contracts knowing that there is a principal although his
identity is not disclosed, he cannot sue the agent. If, however, the agent
declines to disclose the identity of the principal, he will become personally
liable on the contract.
13.18.3
Undisclosed Principal
Sometimes,
an Agent may give impression to the third party as if he is contracting in an
independent capacity (concealing the name of the principal and also the fact
that he is an agent). In such case, the position of each of the party and their
relationship as between them are given below:
a. The position of principal. When
an undisclosed principal is subsequently discovered or he himself intervenes,
the other contracting party (if he has not already obtained judgment against the
agent) may sue either the principal or the agent or both. The principal may
also, if he likes, require the performance of the contract from the other
contracting party. But in such a case he must allow to the third party, the
benefit of all payments made by the third party to the agent.
b. The position of agent. As
between the principal and the agent, the agent has all the rights of an agent
as against the principal; but as regards the third party, he is personally
liable on the contract. He may be sued on the contract and he has the right to
sue the third party.
c. The position of third parties :
The third party may elect to sue either the principal or the agent or both. (sec.231) Ex.13.70
d. If
the principal discloses himself before the contract is completed, the other
contracting party may refuse to fulfil the contract, if he can show that, if he
had known who the principal was or that the agent was not the principal, he
would not have entered into the contract.
The third party
can also claim a right of set-off against the agent. Where the principal
requires the performance of the contract, he can only obtain performance as is
subject to the rights and obligations subsisting between the agent and the
other party to the contract (sec.232)
Ex.13.71, Ex.13.72
Examples:
Principles of Agency
Ex. 13.1. A is P’s
agent authorised to receive money behalf of P. T pays A the money due to P.
T is discharged of his obligation to pay to P. [Ref. 13.2(2)].
Implied
Agreement
Ex. 13.2. A and P
are brothers. A lives in Delhi Meerut Delhi
Agency by estoppel
Ex. 13.3. A tells
T in presence of P that he (A) is P’s agent and P does not object to
this statement of A. Later T supplies certain goods to A, A accepts it on behalf of P. P is
liable to pay the price to T. By keeping quiet, P had led T to
believe that A is really his agent and later on he cannot deny it. [Ref. 13.4.2{b(i)}].
Agency by holding out
Ex.13.4. P regularly
sends his servant to buy for him on credit from T, and later pays T for them.
One day he pays his servant cash to purchase goods. The servant buys goods on
credit from T and misappropriates the cash. T can recover the price from
P as he had held out his servant as his agent. [Ref. 13.4.2{b(iii)}].
Agency by necessity
Ex.13.5. D, a carrier,
finds that a consignment of tomatoes dispatched by E is fast
deteriorating and cannot reach destination in saleable condition. So he sold it
at whatever best price he could (about 1/3 rd of its normal price). E sues D
for damages. D claims he was an agent of necessity. Comment.
[D,
as an agent of necessity, is not liable (Sec. 189)]. [Ref. 13.4.2{b(iv)}].
Agent exceeding his authority in an
emergency
Ex.13.6. P consigns
perishable items to A at Calcutta Vijayawada Calcutta Vijayawada
Ex.13.7. P consigned
a quantity of butter through a railway company. Owing to a strike, it reached
late. The railway company sold the butter. Held, the sale was binding on
P as goods were perishable. [Ref. 13.4.2{biv(a)}].
Ex.13.8. A master of a
ship found cargo would perish before reaching destination. So, he was entitled to put the
ship into the nearest port and sell the goods at the best available price. [Ref. 13.4.2{biv(a)}].
Agency by ratification
Ex.13.9. A
insures P's goods without his authority. P ratifies it. So, the
policy would be valid as if A had been authorized to insure the goods. [Ref. 13.4.3(i)].
Ex.13.10. A
acting for and on behalf of P, effected an assurance which he had no authority
to do. P without demur (hesitation, objection, protest) accepted the money
received under the policy. This is ratification of contract. [Ref. 13.4.3(i)].
Ex.13.11. A, without
authority, buys goods for P. Afterwards P sells them to T on his own account, P’s
conduct implies a ratification of the purchase made for him by A. [Ref. 13.4.3(ii)].
Ex.13.12. A, without P’s
authority, lends P’s money to T. Afterwards P accepts interest from T.
P’s conduct implies a ratification of the loan. [Ref. 13.4.3(ii)].
Ex.13.13. A let
P’s property without P’s consent. A received rent for many years and P sued him
for an account of the rents. Held, P’s action constituted ratification
of such receipts of rent. [Ref. 13.4.3(ii)].
Ex.13.14. A bought
some goods on behalf of P in excess of the price authorised by P. P objected to
the purchase but sold some of the goods. Held, he had ratified the
purchase by selling goods. [Ref. 13.4.3(ii)].
Effect of ratification
Ex.13.15. A, the managing director of a
company, acting on company's behalf but
without its authority, accepted an offer by T. T subsequently withdrew
the offer, but the company ratified A's acceptance. Held, T was bound.
The ratification becomes effective from the time of A's acceptance and so
cannot be revoked by T. [Ref. 13.4.3.1(ii)].
Requisites of Valid Ratification
Ex.13.16. A was
authorised by P to buy wheat at a certain price. But A purchased wheat from T at a higher price, in his own name.
Subsequently P ratified the purchase of A but later refused to
take delivery of the wheat. T brought an action against P. Held, the
contract could not be ratified as A did not act as an agent for P at the time of purchase. [Ref. 13.4.3.2(i)].
Ex.13.17. A entered
into a contract with T on behalf of P, a company proposed to be formed.
P ratified the contract after formation as per law. After some time P went into
liquidation. T sued A upon the contract. A pleaded that the
liability had passed to P on ratification. Held, P was not liable as it
was not in existence at the time of contract. [Ref.
13.4.3.2(ii)].
Ex.13.18. A is
authorized by P to buy certain goods at market price. A buys at a higher
rate but P accepts the purchase. It is later found that goods purchased
by A for P belonged to A himself. The ratification is not
binding on P. [Ref. 13.4.3.2(iv)].
Ex.13.19. A, an
agent of P, entered into an unauthorised contract for purchase of a property
from T for P. P wrote to T ratifying the act of A. Held, P was
liable for acts of A done on
behalf of P. [Ref. 13.4.3.2(iv)].
Ratification should not put a third
party to damages
Ex.13.20. T is in
possession of a property of P. A, who
is not authorised by P, demands from T delivery of the property
on behalf of P. The demand cannot be ratified by P to make T liable for
damages for his refusal to deliver. [Ref.
13.4.3.2(x)].
Requisites of valid ratification
Ex.13.21. T holds a lease from P,
terminable on three months' notice. A. an unauthorised person, gives notice of
termination to T. The notice cannot be
ratified by P, so as to be binding on T. [Ref.
13.4.3.2(x)].
Ex.13.22. A acts like an agent of P without
P’s authority and accepts an offer by T. T withdraws the offer before P comes
to know of it. P subsequently ratifies A's acceptance. The
ratification gives rise to contract with retrospective effect and T is bound by
the contract. [Ref. 13.4.3.2(xi)].
Agency coupled with interest
Ex.13.23. P gives
authority to A to sell F’s land, and to pay himself (A), out of the
proceeds, the debt due to him (A) from P. P cannot revoke this authority,
nor can it be terminated by his insanity or death. [Ref. 13.6(1)].
Agency not coupled with interest
Ex.13.24. A was entrusted by P with certain
wheat to be sold on his (P’s) behalf. Subsequently A advanced a certain
sum of money to P which P failed to pay. P gave orders that the wheat was not
to be sold. A nevertheless sold it to secure his advance. A could
not sell the wheat as A’s agency is not
coupled with interest. [Ref. 13.6(2)].
Agent partly exercised his authority
Ex.13.25. P authorises A to buy
1,00 bales of cotton on account of P and to pay for it out of Ps money lying
with A. A buys 1,00 bales
of cotton in his own name. So A is personally liable for the price. P cannot
revoke A's authority to make payment for the cotton. [Ref. 13.6(4)].
Irrevocable agency where the agent has partly
exercised his authority
Ex.13.26. P authorises A to buy
1,00 bales of cotton on account of P and to pay for it out of Ps money lying
with A. A buys 1,00 bales
of cotton in his own name. So A is personally liable for the price. P cannot
revoke A's authority to make payment for the cotton. [Ref. 13.6(4)].
Ex.13.27. P employs A to
let out his house. Afterwards P lets it himself to a tenant. This is an implied
revocation of A's authority. [Ref. 13.7.1(ii)(c)].
Ex.13.28. A was
appointed agent to do all acts and carry on business on behalf of P, the
principal, in his absence from India India
Factor
Ex.13.29. P delivered his
car to A for sale at a minimum price of Rs 100000. A sold
the car for 75000 to T, who bought it in
good faith. A misappropriated the sale money. P sued to recover the car from T.
Held, as A got the car from P for sale, T got a good title as
owner of the car. [Ref. 13.13.1(a)].
Auctioneer
Ex.13.30. P instructed A to sell a car
by auction, at a reserve price of Rs
100000. At the time of sale, A
inadvertently stated that there was no reserve price and knocked the
sale at Rs 75000 to T. The sale becomes binding on P. [Ref.
13.13.1(b)].
Sub Agent
Ex.13.31. A banker
authorised to let out a house arid collect rent may entrust the work to an
estate agent. [Ref. 13.14.1{ii(a)}].
Ex.13.32. A banker
instructed to make payment to a particular person at a particular place may appoint
another banker who has an office at that place. [Ref. 13.14.1{ii(b)}].
Co-Agent or Substituted Agent
Ex.13.33. P directs
A, his solicitor, to employ an auctioneer to sell his estate by auction. A
names B, an auctioneer, to conduct the sale. B is not a sub-agent, but
is P’s agent for the conduct of the sale. [Ref. 13.14.2(a)].
Ex.13.34. P authorises A
to recover moneys due to P from T. A instructs B a solicitor, to take legal
proceedings against P for the recovery of the money. B is not a
sub-agent, but is an agent for P.
[Ref. 13.14.2(a)].
Responsibility of agent when
sub-agent is properly appointed
Ex.13.35. A, a carrier,
agreed to carry wheat flours of P. A
asked B, another carrier to carry the goods. The goods
were damaged in transit. A is liable
even though B was the actual carrier. [Ref. 13.14.4{i(b)}].
Carry out of work by Agent
Ex.13.36. A, a broker,
who is not supposed to sell on credit, sold goods of P on credit to T, though T
owed substantial amount to P at that time. T becomes Insolvent. A must make
good the loss to P. [Ref. 13.15.1(i)].
Ex.13.37. A, an agent of
P, was instructed to store some goods for P at a particular warehouse. A stored
some quantity at another place where they were destroyed by fire. A is liable to P for the value of
destroyed goods. [Ref. 13.15.1(i)].
Ex.13.38. An
agent, instructed to insure goods, neglects to do so. He is liable to the
principal for their value in the event of their loss. [Ref. 13.15.1(i)].
Ex.13.39. A, a factor,
has a lien on P’s goods in his possession for the monies advanced by A to P. P
directs A to return the goods or sell them on credit. A may not comply P’s
orders until P has repaid all advances made by A. [Ref. 13.15.1(i)].
Work with care by Agent
Ex.13.40. A is an agent
in London Calcutta
Ex.13.41. A, is an
selling agent of P, authorized to sell on credit also. A sells goods to T on credit, without making
the proper and usual inquiries about T’s credit worthiness. T was about to
become insolvent at the time of such sale, T fails to pay. A must compensate P
for loss sustained for the sale. [Ref. 13.15.1(ii)].
Ex.13.42. A, an
insurance broker, takes a insurance policy on a ship owned by P on behalf of P.
A omits to include some usual and
important clauses in the policy. Because of that P could not recover on the
policy from the underwriters. A is bound to make good the loss to P. [Ref. 13.15.1(ii)].
Principal deals not on own account
Ex.13.43. P directs
A to sells his (P’s) estate. A buys the estate for himself in the
name of T. P may repudiate the sale. [Ref.
13.15.1(v)(b)].
Secret Profit
Ex.13.44. An auctioneer
received some additional commission secretly from buyer, without the knowledge
of the Principal (the seller). He
must hand over the commission received to the principal. [Ref. 13.15.1(ix)].
Ex.13.45. An agent sold
his own stock to his principal without disclosing the fact, at prevailing
market price. He must account
for any profit made in the transaction to his principal. [Ref. 13.15.1(ix)].
Ex.13.46. P employed A
to buy a house for him. A bought a house for 200000 in the name of a
nominee and then entered into a contract with the nominee to purchase the house
for 450000 which he resold to P for 500000. Held, A was liable to
account to P for profit of both the transaction, viz, 50000 &
250000. [Ref. 13.15.1(ix)].
Conflict of Interest and Duty
Ex.13.47. P employed
A, a stockbroker, to buy shares of a company for him. A sold his
own shares (he knew that the shares did not have prospects) to P without
disclosing the facts. P could rescind the contract. [Ref. 13.15.1(xi)].
Right to receive remuneration
by Agent
Ex.13.48. A was
appointed agent to secure orders for advertisements in a newspaper. The
commission was to be paid when an advertisement was published. After A secured
some orders, the agency was terminated. Held,, he was entitled to
commission on orders obtained by him (though the advertisements were not
published during the tenure of his agency). [Ref.
13.15.2{ii(a)}].
Ex.13.49. A was
employed an agent to sell a property on the terms that commission would be paid
on completion of sale. A produced person ready and willing to buy but
the owners refused to sell. Held, the agent was not entitled to
commission as sale had not been completed. [Ref.
13.15.2{ii(a)}].
Ex.13.50. An agent was
appointed to introduce customer to purchase the principal's property. He introduced one customer: The sale was settled
and earnest money paid. The sale fell through because of the customer's
inability to find money. Held, the agent was entitled to his agreed
commission. [Ref. 13.15.2{ii(a)}].
Ex.13.51. P employs
A to recover Rs.1,00,000 from T, and to invest it in good
security. A recovers Rs. 1,00,000 and invest Rs. 90,000 on good security
and Rs. 10,000 on security known to him to be bad. P loses Rs. 2,000 on
the bad investment. A is entitled
to remuneration for recovering Rs. 1,00,000 and investing Rs. 90,000. He is not
entitled to any remuneration for investing
10,000 and he must make good of the loss of Rs. 2,000 to P. [Ref. 13.15.2{ii(b)}].
Ex.13.52. P employs
A to recover Rs. 1000 from T, but due to A's misconduct, the
money is not recovered. A is entitled to no remuneration for his
services and also A must make good the loss to P. [Ref. 13.15.2{ii(b)}].
Ex.13.53. P engaged A,
an auctioneer, to sell some property for £ 50 as commission. A sold
the property and received in additional £ 20 as commission from the purchaser. P may recover £ 20 extra received and
also £ 50 he had paid to A. [Ref. 13.15.2{ii(b)}].
Right of indemnification of Agent
Ex.13.54. P employs A to contract with T to
deliver certain goods of P to T. P does not send the goods to A. T sues A
for breach of contract. A defends the suit and had to pay damages,
costs & expenses. P is liable to A for such damages, costs and
expenses. [Ref. 13.15.2{iv(a)}].
Ex.13.55. P employs
A to beat T, and agrees to indemnify him against all consequences of the act. A
beats T and has to pay damages to T for so doing. P is not liable to
indemnify A for those damages. [Ref. 13.15.2{iv(b)}].
Ex.13.56. P asks A,
proprietor of a newspaper to print a libel upon T in his paper. P agrees to
indemnify A against the consequences of the publication, and all costs and
damages of any action in respect thereof. After publication of the libel, A is
sued by T and has to pay damages, and also incurs expenses. P is not liable to A
upon the indemnity. [Ref. 13.15.2{iv(b)}].
Ex.13.57. P gets court’s
decree for execution of T’s goods. P asks the officer of the Court to
seize certain goods of K, representing them to be the goods of T. The officer
seizes the goods and is sued by K. P is liable to indemnify the officer for the
sum which he had to pay to K in consequence of carrying out P’s instructions. [Ref. 13.15.2{iv(c)}].
Ex.13.58. P asks A to
sell goods of T, lying in possession of P. P has no right to dispose those
goods of T . A, not knowing this, sells the goods and hands over the proceeds
to P. Afterwards T, sues A and recovers the value of the goods and costs from
A. P is liable to pay the amount paid by A to T including expenses incurred by
A. [Ref. 13.15.2{iv(c)}].
Right of compensation of Agent
Ex.13.59. P employs A as
a bricklayer in building a house and P puts up the scaffolding himself. The
scaffolding is unskillfully put up by P and A is injured. P must compensate A
for the loss suffered. [Ref. 13.15.2(v)].
Termination of Substituted Agent’s
authority
Ex.13.60. P directs A to sell goods for him, and
agrees to pay 5% commission to A on sale
value. P afterwards, by a letter, revokes A's authority. Before receiving the
letter, A sells the goods for Rs. 1,000. The sale is binding on P, and A
is entitled to Rs. 50 as his commission. [Ref.
13.15.4(iii)].
Ex.13.61. P, at Madras Bombay Madras
Personal liability of Agent
Ex.13.62. A executed
a hundi in favour of T for a loan taken by A from T. The hundi purported
to be drawn by a firm. A did not sign the hundi as agent of the
firm and did not disclose to T the name of the principal (the proprietor of the
firm). A is personally
liable for the hundi. [Ref. 13.16{b(v)}].
Right of person dealing with agent
personally liable
Ex.13.63. T enters into
a contract with A to sell him 100 bales of cotton and afterwards
discovers that A was acting as agent for P. T may sue either A
or P, or both, for the price of the cotton. [Ref. 13.16.1].
Agent acts
within his authority
Ex.13.64. F
appoints A to receive money on his behalf. He receives from T a sum of money
due to P. T is discharged of his
obligation to pay the sum in question to P. [Ref. 13.18.1(ii)].
Agent exceeds his authority
Ex.13.65. P, being
owner of a ship and cargo, authorised A to procure an insurance on the
ship. A procured a policy on the ship, and another on the cargo. P is
bound to pay the premium for the policy on the ship, but not for the policy on the Cargo. [Ref. 13.18.1{iii(a)}].
Ex.13.66. P authorises
A to buy 10 sheep for him. A buys 10 sheep and 20 lambs for lump
sum of Rs. 6,000. P may repudiate the whole transaction. [Ref. 13.18.1{iii(b)}].
Agent acts fraudulently
Ex.13.67. P appoints A
to sell his goods, A
induces T to buy them by a misrepresentation (which A was not authorised by P
to make). P may repudiate the contract. [Ref. 13.18.1(iv)].
Ex.13.68. A, the captain
of P’s ship, signs bills of lading in favour of a pretended consignor, without
having received the goods mentioned therein on board. The bills of lading are
void as between P and the pretended consignor. [Ref. 13.18.1(iv)].
Ex.13.69. P instructed
his agent A, to reinsure an overdue ship at a certain port. A heard that the
ship had actually been lost. He did not disclose this fact to the insurer. Held,
P could not recover upon the policy. [Ref.
13.18.1(iv)].
Undisclosed Principal
Ex.13.70. T enters
into a contract with A to sell him 100 bales of cotton. Later on, T
discovers that A was acting as agent for P. T may sue either A or
P, or both, for the price of the cotton. [Ref. 13.18.3(c)].
Ex.13.71. A, who owes Rs. 500 to T, sells rice valued
rupees 1000 to T. A is acting as agent of
P in the transaction but T has no
knowledge of it. P cannot compel T to take the rice without allowing him to set
off A's debt. [Ref. 13.18.3(d)].
Ex.13.72. A
sold goods of P, an undisclosed principal, to T. P sued T. T
claimed to set off a debt by A to T. This set-off is allowed. However, such
set-off will not be allowed if T was aware that A was an agent although he was
not aware of the identity of the principal. [Ref.
13.18.3(d)].
For more details, refer
to Business & Corporate Laws, by Asok Nadhani, BPB Publications, www.bpbonline.com,
bpbpublications@gmail.com
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