Agency

Agency contract

1. Agency By Dr. Sridevi Krishna Asst. Professor VVLC

2. Qui per alium per seipsum facere videtur He who does an act through another is deemed in law to do it himself or Qui facit per alium facit per se He who acts through another acts himself. Definition of Agent and Principal Section 182 : An agent is a person employed to do any act for another or to represent another in dealings with third person: the person for whom such act is done, or who is so represented is called the Principal.

3. Agency An agency is created when the relationship of principal and agent arises where one party, the principal, consents that the other party, the agent, shall act on his behalf and the agent consents so as to act. Representative character and derivative authority may briefly be said to be the distinguishing feature of an agent.

4. Essentials of agency 1)Principal must be competent to contract S 183: Any person who is of the age of majority according to the law to which he is subject and who is of sound mind, may employ an agent. 2) Any person may become an agent S 184: As between the Principal and third person any person may become an agent.

5. Continued.. But no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions herein contained. 3) No consideration is necessary for the creation of agency S 185: another exception to S25.

6. Continued.. Fiduciary Position of the Agent: Possession of agent is the possession of the principal and in view of the fiduciary relationship agent cannot be permitted to claim his own possession English Law: David Lvell V John Lawson Kennery Facts : where the agent who was collecting the rent from the tenants on behalf of the owner and depositing it in a separate account continued to do so even after the death of the owner. After some years of the owner’s death his heir’s assignee brought an action against the agent.

7. continued The agent pleaded adverse possession but plaintiff succeeded. House of lords held that rents were collected on behalf of deceased Ann Duncan and not by the agent on his own behalf. Thus if an act is done on be half of principal, agent cannot claim the same.

8. Different Kinds of Agent 1. Brokers : he is an agent who is employed by the principal to enter into contracts for sale or purchase on behalf of principal. He is not given possession of the property. He normally negotiates a contract between the parties. 2. Factors : he is the agent who is entrusted with the possession and control of the goods to be sold by him for his principal. 3. Auctioneers : one who sells the property at auction. He is primarily the agent of the seller, but upon the property being knock down he becomes also the agent of the buyer.

9. Del credere Agent He is a mercantile agent who for extra commission takes the responsibility that person with whom he contracts on behalf of the principal will perform their contract. Thus if such a person fails to perform his contract, a del credre agent will be responsible to the principal for the same.

10. Pakka Adatia He is an agent to whom goods are handed over by the principal and then the actual sale of goods becomes the agent’s own affair. Such agent is in vague in Mumbai markets. He has authority to enter into transaction in his own name.

11. Creation of agency 1. By Actual Authority: Section 186: the authority may be express or implied. An authority may be express when it is given by words, spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or ordinary course of dealing, may be accounted circumstances of the case. A owns a shop in Serampore living in Kolkatta , and visiting the shop occasionally. The shop is managed by B and he is in habit of ordering goods from C in the name of A for the purpose of the shop and of paying for them out of A’s funds with A’s knowledge. B has an implied authority from A to order goods from C in the name of A for the purpose of the shop.

12. Extent of Agent’s Authority Section 188: an agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such act. A employed by B, residing in London, to recover at Bombay a debt due to B. A may adopt any legal process necessary for the purpose of recovering the debt and may give a valid discharge for the same.

13. 2. By Ratification ಅನುಮೊದನೆ Ratification means an act which the principal confirms unauthorized acts of the agent. Even if the agent enters into a contract the authority, consent or knowledge of the principal may, if he likes, rarify it and thereby accept the benefits and obligations arising out of such a contract. Section 196 : Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratify them, the same effects will follow as if they had been performed by his authority. 

14. Continued.. Section 197 : Ratification may be expressed or implied in the conduct of the person on whose behalf the acts are done. A without the authority, buys goods for B. Afterwards B sells them to C, on his own account. B’s conduct implies a ratification of the purchase made for him by A. A without B’s authority, lend B’s money to C and afterwards B accepts interest on the money from C. B’s conduct implies a ratification of the loan.

15. Essentials of valid ratification 1. The agent must have acted on behalf of the principal It is not always necessary for the agent to name the principal but he must be identifiable. If the agent acts in his own name and does not disclose the name of the principal, his acts cannot be ratified. Keighly Masted &Co V Durant Facts : the appellant authorized a corn merchant to buy wheat at a certain price jointly for himself as well as the appellants. He acted in excess of his authority by purchasing the wheat at a higher price from the respondents and did so in his own name. subsequently,, the appellants ratified his transaction. They, however refused to take delivery of the wheat. Held: the App were held not liable for the alleged ratification was invalid bcoz while purchasing the wheat, from the respondents he did not profess to be acting on behalf of another.

16. 2. The principal must be in existence & competent to contract Kelner V Baxter Facts : the defendants entered into a contract as promoters of an unformed company. After the formation of the company was complete, the Co ratified the said contract. Subsequently, the Co went into liquidation. When the defendants were sued for the breach of the contract, they took the defense that since the Co had ratified the contract, they were not liable for the breach of the contract. This contention was rejected by the court. Ratification can only be by a person ascertained at the time of the act done by a person in existence either actually or in contemplation of law. Thus the liability of the promoters continued in spite of ratification.

17. 3. Only lawful acts can be ratified Section 200 : An act done by one person on behalf of another, without such other person’s authority, which, if done with authority would have the effect of subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have such effect . A holds a lease from B, terminable on 3 months notice. C an unauthorized person gives notice of termination to A. the notice cannot be ratified by B so as to be binding on A.

18. continued 4. Ratification of unauthorized act performing part of a transaction will imply the ratification of the whole of the transaction . Section 199: A person ratifying an unauthorized act done on his behalf ratifies the whole transaction of which such act formed part.

19. Continued.. 5. Ratification must be made on full knowledge of the fact : Section 198: No valid ratification can bed made by a person whose knowledge of the facts is materially defective. What if principal wants to ratify? if he intends to ratify the act and take the risk, whatever the circumstances may have been.

20. Continued.. 6. Ratification must be within a reasonable time. 7. Manner of ratification : it can be through words or conduct. He may agree for the acts of his agent. He must get the option to accept it or not to accept it.

21. 3 . Ostensible Authority/Apparent authority It is authority of an agent as it appears to others. The principal may by words or conduct create an inference that an authority has been conferred upon an agent even though no authority were given in fact. In such case, if an agent contracts within the limits of his apparent authority, without actual authority the principal will be bound to third parties by his agent’s acts.

22. continued Section 237 : When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority.  A consigns goods to B for sale and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions enters into a contract with B to buy goods at a price lower than the reserved price. A is bound by the contract.

23. Continued. Agent himself cannot by his representation create the ostensible authority. It must be made either by the principal himself or by his authority. The third party must rely on the representation of the agent that he has authority to act as an agent. It must not be in the knowledge of the third party that the agent has in fact no authority.

24. 4.By legal presumption in case of married women 4. Agency between husband and wife If they are living together a legal presumption arises that wife has the authority of an agency for all domestic matters ordinarily entrusted to a wife, as the reasonable supply of goods and services being suitable in kind and sufficient in quantity and necessary in fact according to the condition in which they live. The husband and wife must be cohabiting together. The husband and wife must be living in their domestic establishment. The wife has the authority to pledge husband’s credit only for necessaries. The legal presumption cannot be invoked where husband gives reasonable allowance to his wife and also duly pays it.

25. Giridhar Lal V Crawford Husband and wife lived together and husband used to give reasonable allowance to his wife and the said allowance was sufficient to meet the domestic expenses as well as all her personal expenses. Despite this she borrowed further loan from plaintiff. The debt having not paid the plaintiff brought an action against Mr. Crawford and hid wife claiming the amount. Held : the husband was held liable for the debt. All HC: the husband can only be liable when it is known that he has expressly or impliedly sanctioned what the wife has done. It could have been rebutted: warned tradesman not to give credit; expressly forbidden wife not to pledge his credit; had supplied wife with sufficient allowance.

26. 5.By implication of law in case of necessity Agency of necessity arises whenever a duty is imposed upon a person to act on behalf of another apart from contract, and in circumstances of emergency, in order to prevent irreparable injury. It also arises where a person carries out the legal or moral duties of another in the absence of default of that other or acts in his interest to preserve the property from destruction.

27. Relation of Principal and Agent inter se The rights and duties of the principal and agent depend upon the terms of the contract which they enter into. Beside, it also gives rise to certain rights and duties. 1. Duty to conduct business according to the directions of the principal- Section 211 : An agent is bound to conduct the business of his principal according to the directions given by the principal, or in the absence of any such directions according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues, he must account for it

28. continued A, an agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investments. A must make good to B the interest usually obtained by such investments . Solomon V Barker Facts : a broker was entrusted with some goods to sell them at a proper price. Without making an estimate of the value of the goods in accordance with the prevailing custom of that trade, he sold them at an inadequate price. Held : he is liable for loss.

29. 2. Skill & diligence Section 212 : An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business unless the principal has notice of this want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill, or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill, or misconduct.

30. Continued.. Agent is liable to make compensation to his principal only in respect of the direct consequence of his neglect, want of skill or misconduct and he is not liable in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct. A an insurance broker employed by B to effect an insurance policy on a ship, omits to see that the usual clauses are inserted in the policy. The ship is afterwards lost. Inconsequence of the omission of the clauses nothing can be recovered from the under writers. A is bound to make good the loss to B

31. Panna Lal Janakidas V Mohan Lal Facts: the goods purchased and stored by the agent for his principal were lost because of the negligence of the agent to insure the goods. However, an ordinance passed by the government provided that half compensation was to be given if goods were not insured against fire. Agent was able to obtain this half price but for the other half he contended that the loss was too remote and that it could not be foreseen. Held: SC : he is liable for the value of the other half. Once misconduct is proved the fact that the ordinance existed did not exist and could not have been in contemplation of the parties is irrelevant for deciding the question of liability. The liability was incurred by reason of their breach of duty.

32. 3. Duty not to allow his personal interest and his duty to conflict with each other English case: De Bushe V Alt Facts: a ship was consigned by the plaintiff to a company in China for sale fixing a minimum price of 90,000 pounds payable in cash. The said company, with the consent of the plaintiff, employed the defendant to sell the ship. The defendant, made efforts to sell ship himself but failed. The defendant purchased the ship himself and paid 90000 pounds for the same. After some time the defendant resold the ship for 1,60,000 pounds. When this fact came to the knowledge of the principal he brought an action to recover the profits gained by defendants.

33. Continued.. Held : he was bound to account for the profits gained by him by resale of ship. It was wrong on the part of the agent to buy ship for himself which he receives from principal for sale, he can do so only by disclosing this fact to the principal. If he does not disclose this fact to the principal the principal is entitled to avoid the transaction and may also claim the profits from the agent.

34. Continued.. Section 215: If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows, either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him . A directs B to sell A’s estate. B buys the estate for himself in the name of C. A, on discovering that B has bought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material fact, or that the sale has been disadvantageous to him. 

35. 4. Duty not to make secret gains Agent is bound to disclose and to account all the profits he makes out of the agency. Happisley V Kne Brothers Facts : the defendants, auctioneers were engaged by the plaintiff for the sale of certain property. The plaintiff agreed to pay them certain commission and certain other expenses. While charging the full amount from the plaintiff, they did not deduct the discount received from the printers and advertisers honestly believing that they could keep the said discounts themselves. Held : the defendants were bound to account to the plaintiff the said discounts received by them.

36. Continued.. Section 216: if an agent without the knowledge of his principal, deals in the business of the agency on his own account instead of an account of his principal, the principal is entitled to claim from the agent which may have resulted to him from the transactions. A directs B his agent, to buy certain horse for him. B tells A it cannot be bought and buys horse for himself. A may, on discovering that B has bought the horse, compel him to sell it to A at the price he gave for it.

37. 5. Duty to pay sum received for principal Section 218: agent is bound to pay to his principal all sums received on his account. He may retain any sums received on account of the principal in the business of the agency all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business and Remuneration as may be payable to him for acting as agent.

38. 6. Duty to render accounts Section 213: An agent is bound to render proper accounts to his principal on demand. Duty to communicate with the principal : section 214: it is the duty of an agent in cases of difficulty, to use all reasonable diligence in communicating with his principal and in seeking to obtain instructions.

39. 8 . Duty not to delegate Section 190 : Last but not the least it is the duty of an agent not to delegate his functions to a sub-agent unless by the ordinary custom of trade a sub-agent may, or from the nature of the agency, a sub agent must be employed. Except with the express or implied assent of the principal, delegate his authority and the principal will not be bound by the act or a contract of a sub-agent whose appointment is not thus sanctioned.

40. Exception Appointment of Sub-agent : when there is a custom of trade or where nature of agency requires the employment of a sub-agent. He can be appointed even during emergency because agent has a duty to protect his principal from losses. If sub-agent is properly appointed, the principal becomes bound by the acts of sub-agent. He is liable to the agent and agent is responsible to the principal for the acts of sub-agent.(section 192) When agent appoints a sub-agent without having authority to do so the relationship of agent and sub-agent will be that of principal and agent. The agent will be responsible for the acts of the sub-agent.(section 193)

41. Continued.. Section 194: Subordinate Agent : When agent having authority of his principal expressly or impliedly names another person to act for the principal in the business of agency, such a person will not be deemed to be a sub-agent. He will be deemed to be an agent of the principal for such part of the business of agency as is entrusted to him. A directs B to sell his estate by auction and to employ an auctioneer for the purpose. B names C, an auctioneer to conduct the sale. C is A’s agent for the conduct of the sale. Section 195 : it is the duty of the agent to exercise the same amount of a discretion as a man of ordinary prudence would exercise in his own case while naming such person. If agent has exercised such discretion, he will not be liable to the principal for the acts or negligence of the agent so named.

42. Rights of Agent 1. Right to receive remuneration : it is the right of the agent to receive from his principal the remuneration which was agreed. If the remuneration was not agreed, he will be entitled to receive reasonable remuneration regard being had to the nature of the work performed by him. He can receive remuneration only after he has carried out his duties or fulfilled the conditions provided for in the agreement of agency. Section 219 : if there is no express or special contract to determine the remuneration payable to the agent, payment of such performance of any act is not due until the performance of such act. The remuneration of the agent becomes due only after he completes the work for which he is appointed.

43. Continued.. Turner V Goldsmith The plaintiff was employed by the defendant, a manufacturer of shirts, for a period of 5 years as his agent and canvasser. It was his duty to obtain orders for and sell the goods either manufactured or sold by the defendant. Before the lapse of the period of 5 years, the factory was burnt by fire and he did not thereafter restart his business. Consequently, the agency of the plaintiff was terminated. He sued the defendant for breach of the contract of his employment as an agent. Court of Appeal : there was an implied term in the contract to allow the plaintiff to earn commission for a period of five years and hence they decided in his favor. In the absence of any express or implied term principal will not be liable.

44. Continued.. Saraswathi Devi V Motilal Facts : the plaintiff who was an estate agent had been engaged by the defendant Smt. Saraswathi Devi and her husband to find a purchaser for certain property. The plaintiff found a customer, who was willing to pay Rs 1,27,000/- for the property and who also paid an advance of Rs 30000. Subsequently, the defendants refused to sell the property to that customer. The plaintiff brought an action against the defendants to recover Rs 2500 as remuneration for finding the customer. Held : according to the nature of the agreement the remuneration was payable to the plaintiff when he found the purchaser who was ready, willing and able to purchase the property and since he had done that he is entitled to his commission.

45. Agent not liable to remuneration for business misconduct Section 220 : An agent who is guilty of misconduct in the business of agency is not entitled to any remuneration in respect of that part of the business which he has misconducted. A employs B to recover 1,000 rupees from C. Through B’s misconduct the money is not recovered. B is entitled to no remuneration for his services, and must make good the loss. 

46. 2. Right to indemnity Section 222 : The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him. B, at Singapure , under instructions from A of Calcutta, contracts with C to deliver certain goods to him. A does not send the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorises him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses

47. Indemnity for injury to the third person Section 223: where an agent is employed to do an act and he performs that act in good faith, the agent will be entitled to be indemnified by the principal against the consequences of that even though they cause an injury to third person. 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

48. Non liability of employer of agent to do a criminal act Section 224: Where one 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 . A employs B to beat C, and agrees to indemnify him against all consequences of the act. B thereupon beats C, and has to pay damages to C for so doing. A is not liable to indemnify B for those damages . 

49. 3. Right to compensation for injury caused by principal’s neglect Section 225: 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 A employs B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskillfully put up, and B is in consequence hurt. A must make compensation to B. 

50. 4 . Right to retain amount of sums received on principal’s account Section 217: An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent. 5. Right to lien : section 221:In the absence of any contract to the contrary, 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, disbursements and services in respect of the same has been paid or accounted for to him.

51. Essential conditions for lien The agent must be in lawful possession of the goods. There must not be any right inconsistent with the lien. The property should belong to the principal. The property should have been received by him in his capacity as an agent. The right of lien is subject to the rights of third parties and equities against the principal.

52. Loss of lien Loss of possession Waiver of right

53. Relation between principal and third parties Qui facit per alium facit per se He who acts through another acts himself. Section 226 : contracts entered into through an agent and obligation arising from acts done by an agent may be enforced in the same manner and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person. A buys goods from B knowing that he is an agent for their sale but not knowing who is the principal. B’s principal is the person entitled to claim from A the price of the goods. Principal is liable not only for the acts done by the agent under actual or real authority but also done under ostensible authority.

54. Section 237 Liability of principal inducing belief that agent’s unauthorized acts were authorized.— When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority.  A consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.

55. Liability of principal when agent exceeds his a uthority Section 227-Principal how far bound, when agent exceeds authority .—When an agent does more than he is authorized to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal. A, being owner of a ship and cargo, authorizes B to procure an insurance for 4,000 rupees on the ship. B procures a policy for 4,000 rupees on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo.

56. Section 228 Principal not bound when excess of agent’s authority is not separable .—Where an agent does more than he is authorized to do, and what he does beyond the scope of his authority cannot be separated from what is within it, the principal is not bound to recognize the transaction. A, authorizes B to buy 500 sheep for him. B buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A may repudiate the whole transaction. 

57. Consequence of notice given to an agent section 229 Any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal.  A is employed by B to buy from C certain goods, of which C is the apparent owner, and buys them accordingly. In the course of the treaty for the sale, A learns that the goods really belonged to D, but B is ignorant of that fact. B is not entitled to set-off a debt owing to him from C against the price of the goods. 

58. Effect of fraud and misrepresentation by agent Section 238 : Misrepresentation made or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals; but misrepresentations made, or frauds committed, by agents, in matters which do not fall within their authority, do not affect their principals.  A , being B’s agent for the sale of goods, induces C to buy them by a misrepresentation, which he was not authorized by B to make. The contract is voidable, as between B and C, at the option of C.

59. Continued.. According to section 238 misrepresentation or fraud committed by an agent may be divided into two categories: Under his actual or ostensible authority Not covered within his authority. Principal will be liable for the acts which fall under first category and not for second category Lloyd V Grace Smith & Co .

60. Rule of agent’s immunity and its exception An agent position is that of an intermediary between the principal and third party. Section 230 :   Agent cannot personally enforce, nor be bound by, contracts on behalf of principal .—In the absence of any contact to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

61. Continued. Presumption of contract to contrary.—Such a contract shall be presumed to exist(making agent personally liable) in the following cases :— where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad ;( foreign principal) where the agent does not disclose the name of his principal; where the principal, though disclosed, cannot be sued.

62. E xceptions Foreign principal : an agent can personally enforce the contract when he is acting on behalf of foreign principal. Link international and another V Mandyer National Paper. Facts : there was a contract for purchase of press roll machine from foreign company. The appellant acted as agent between respondents and foreign company. But only shell of machine instead of full machine was supplied. A suit for damages was therefore filed. The courts below held that appellant facilitated playing fraud upon the respondent as respondent was kept in dark even though they were aware that only shell was being supplied. Appellate court: Appellant would be liable for loss caused to respondent irrespective of fact whether contract was entered into by appellant on behalf of foreign company or it was direct contract. Thus Respondent can recover loss from agent.

63. Principal undisclosed Section 230(2) where the agent does not disclose the name of his principal the presumption shall exist that he can personally enforce contracts entered into by him and be personally bound by them. Trilok Chand Jain V Rameshwar Lall Tulsiyan and others. Facts : P instituted suit for realisation of Rs 2000 principal amount and Rs 700 as interest from the defendants.A sum of Rs 2000 was advanced by the plaintiff on 1/2/1960 which was executed by the first defendant. The first defendant had disclosed the name of the firm (Principal) namely Sri. Ganeshji Umberalla Manufactring Co although he did not disclose the name of the real owner of the firm. In the written statement filed on behalf D1 the execution of was not denied but he contended that the firm Sri GUMCo was not his ancestral business but it belonged to one Gopal Marwari of Kolkatta of which he was mere manager on salary basis. The said business was closed in the year 1961.

64. Continued.. The Defendant 1 denied any personal liability for the claim of the plaintiff. Held: Patna HC: D1 is liable as agent. D1 himself being contracting party and having signed the instrument without qualification showing that he was signing the same as an agent of some named principal he must be held personally liable, although in the body of the instrument name of the firm was mentioned without any indication as to who was the real owner of the same. The plaintiff has raised his suit on the amount which he has paid to the D1.

65. continued Section 231: but where the principal discloses himself before the contract is completed the other contracting party may refuse to fulfill the contract if he can show that if he known who was the principal in the contract or if he had known that the agent was not a principal, he would not have entered into contract. A enters into contract with B to sell goods and afterwards discovers that B was acting as an agent of C. Who is liable to A for the price of goods sold?

66. Continued.. Since when A entered into contract with B he did not know that he was acting as an agent for C, nor did B inform A that he was an agent of C, B will be personally liable for the price of the goods. Section 232 : when one person makes a contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, the principal, if he requires the performance of the contract can only obtain such performance subject to the rights and obligations subsisting between the agent and the other party to the contract. A owes 500 rs to B. Subsequently sells 1000 rs worth of rice to B. A is acting as an agent for C in the transaction, but B has no knowledge nor reasonable ground of suspicion that such is the case, C cannot compel B to take the rice without allowing him to claim set-off for A’s debt.

67. Clarkson Booker Ltd V Andjel Andjel bought air tickets from a travel agent company, Clarkson booker Ltd for an undisclosed principal Peters & Miner Ltd. Andjel disclosed to the travel agent that he was acting for the undisclosed principal. As the bills remained unpaid, the travel agent wrote to both asking to pay, failing which the travel agent threatened legal proceedings. Payment was not made and the travel agent started proceedings against the principal. At this point of time, the principal was insolvent. The travel agent did not proceed further with the proceedings but instead started proceedings against the agent. The agent claimed that the travel agent had elected to hold the principal liable and thus was precluded from proceeding against him. Held- the mere initiation of proceedings did not amount to an election of the right. Thus, the travel agents were allowed to proceed against the agent.

68. Where the principal though disclosed cannot be sued Section 230(3): the agent incurs personal liability where although he discloses the principal, yet he cannot be sued. This includes where principal is not in existent or incompetent to contract.

69. Pretended agent Section 235 : A person untruly represents himself to be authorized agent of another, and thereby induces a third person to deal with him as such agent, is liable, if his alleged employer (principal)does not ratify his acts, to compensate to the other in respect of any loss or damage which he has incurred by so dealing. But such pretended agent will not be liable if his principal ratifies his acts.

70. Termination of agency Section 201: the authority of an agent may come to an end in the following ways: By Revocation Renunciation of business of agency by agent Completion of the business of agency By death or insanity of the principal or agent By insolvency of principal

71. By revocation Section 201 : an agency is terminated by the principal revoking his authority. Section 207: revocation may be express or implied in the conduct of the principal or agent respectively. A empowers B to let his house. Afterwards A lets in himself. This is an implied revocation of B’s authority. Southern Roadways Ltd., Madurai v. S.M.Krishnan . Facts : the appellant company as Southern Roadway Ltd. was engaged in the business of transport of goods and parcels to different places in Southern India. It appoints S. M. Krishnan (respondent) an agent at Madras city for the purpose of carrying on its business. Clause III of the agreement by which he was appointed provided that the respondent should arrange a suitable godown and engaged employees. Clause XI provided for his removal from service at any time without notice.

72. It also provided that upon removal of the agent the company could utilize the service of the employees engaged by the respondent. As per the agreement the company took on lease godown at No. 10, Srinivasan Road, T.Nagar , Madras. T he godown was put in the possession of the respondent for the purpose of carrying on his agency business of the company. In course of the company’s audit it was discovered that the respondent had mismanaged the business and misappropriated the income of the company. By letter dated October 13, 1988, the company terminated his agency with effect from October 14, 1988 .

73. continued The respondent prevented R. Sundarajan (the new agent appointed) and also the company from carrying on business at godown premises. The company, therefore, had to institute a suit for declaration of its right to carry on business in the said premises. Permanent injunction restraining the respondent from interfering was also sought for. The suit was based on two separate grounds. The first related to legal right of the company to carry on its business after termination of agency of the respondent;

74. the second concerned the factum of taking actual possession of the premises on October 15, 1988. Pending the suit, the company moved to the High court for temporary injunction. The respondent was restrained by means of temporary injunction from interfering with the company’s transport business in goods, and parcels at the suit premises. The respondent took up the matter in appeal before Division Bench of High Court. The division Bench vacated the injunction . The Supreme Court held: “The principal has rights to carry on business as usual after the removal of his agent. The agreement between the parties in this case does not confer right on the respondent to continue in possession of the suit premises even after termination of agency. Nor does it preserve right for him to interfere with the company’s business. The notice clearly prescribed that he can be removed at any time.

75. continued Section 203 : The principal may revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal, Section 202 : but where the agent has himself an interest in the property which forms the subject matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. A gives authority to B to sell A’s land and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority. Revocation of authority is further subject to following principles :

76. i)Revocation to come into effect prospectively (Sec 204) “ The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations arises from acts already done in the agency.” A authorises B to buy 1000 bales of cotton on account of A and to pay for it out of A’s money remaining in the B’s hand. Buys 1000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authority so far as regards payment for the cotton.

77. ii) Compensation for revocation before expiry of time (Sec 205) “Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agency, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.”

78. iii) Notice of revocation (Sec 206) “Reasonable notice must be given of such revocation or renunciation; 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.”

79. 2. Renunciation of the business of agency by agent (Sec 201) Section 201 an agency is terminated when the agent renounces the business of agency. Renunciation may be expressed or may be implied from the conduct of the agent. Termination of agency by renunciation is subject to the provision contained in section 205 and 206 referred to earlier. That is to say, F irstly , reasonable notice must be given of renunciation. Secondly , if the agency is for a certain time, the agent will be liable to make compensation to the principal for the renunciation of the agency without sufficient cause.

80. 3. Completion of the business of the agency s 201 An agency comes to an end when the business of agency is completed. 4. By the death or insanity of principal or agent: s 201 An agency comes to an end on the death or insanity of either the principal or agent.

81. 5. By insolvency of principal (Sec 201) An agency comes to an end when the principal is adjudged insolvent under the provision of any Act for the time being in force for the relief of insolvent debtors.

82. Termination of sub-agent’s authority (Sec 210) The termination of the authority of an agent causes the termination of the authority of all sub-agents appointed by him.