AGENCY

(S. 182238)

In India the relationship between

AGENT and PRINCIPAL is contractual in
nature.
The term AGENCY is not defined
under the Act.
However AGENT is defined as a
person employed to do any act for
another or to represent another in
dealings with third persons

S.182
a person employed
to do any act for
another or to
represent another in
dealings with third
persons

The person for

whom the act is
done or is so
represented

AGENT

PRINCIP
AL

The rule of agency is based on the

maxim

QUI FACIT PER ALIUM,

FACIT PER SE
Meaning: He who acts through an agent
is himself acting

Agent has the power to represent his

principal in dealings with the third
person. This representative capacity
coupled with a power to affect the legal
relations of the principal with third
persons, distinguishes an agent from a
normal employee.
Usually an agent drops out after
effecting a contract between his principal
and third party.
He is not liable for the failure of the third
party to perform.

The concept of agency has been

explained by the Madras High Court in
Krishna vs. Ganapathi, AIR 1955 Mad
648
in legal phraseology, every person who
acts for another is not an agent. It is only
when he acts as a representative of the
other in business negotiaitions, that is to
say, in the craetion, modification or
termination of contarctual obligations,
between the other and third parties, that
he is an agent. Representative character
and derivative authority may briefly be
said to be the distinguishing feature of

Salient features

1.BASIS: the basic essence of

agency is that the principal is
bound by the acts of the agent and
is answerable to the third parties
2.CONSIDERATION: the relationship
between principal and agent need
not be supported by consideration.
3.CAPACITY(principal and agent): a
person inorder to act as a principal
or an agent must be a major and of
sound mind

KINDS OF AGENTS
FACTOR
BROKER
AUCTIONEER
POWER OF ATTORNEY

HOLDER
DEL CREDERE AGENT

SUBAGENTS
SUBSTITUTED
AGENTS

FACTOR
In India as well as in England FACTOR
means an agent entrusted with the
possession of goods for the purpose of
selling them.
He is a merchantile agent whose
ordinary course of business is to
dispose of goods, of which he is
entrusted with the possession or
control by his principal.

BROKER
A kind of merchantile agent,
appointed to negotiate and
make contracts for the sale or
purchase of property on
behalf of his principal, but is
not given possession of
goods.

AUCTIONEER

An agent appointed
to sell goods at public
auction.

POWER OF ATTORNEY
HOLDER
A written document in which one person
(the grantor) appoints another person to act
as an agent on his or her behalf, thus
conferring authority on the agent to perform
certain acts or functions on behalf of the
principal.
Powers of attorney are routinely granted to
allow the agent to take care of a variety of
transactions for the principal.

DEL CREDERE AGENT

Another type of merchantile agent
different from the usual agent.
On the payment of some extra
commission, this agent undertakes to be
liable to the principal for the failure of
the third party to perform the contract.
His extra commision for the guarantee
is known as del credere commision.

Eventhough there is a liability to pay the

debt of another, Del credere agency is not a
contract of guarantee.
He is not liable for any default on the part of
his principal. He is also not liable for any
disputes between the principal and the buyer
relating to the contract or the sum due.

The nature of liability incurred by a

del credere agent has been explained
in Champa Ram v Tulsi Ram,
(1927) 26 All LJ 81
a del credere agent incurs only a
secondary liability towards the
principal. His legal position is partly
that of an insurer and partly that of a
surety for the parties with whom he
deals to the extent of any default by
reason of any insolvency or something
equivalent

Thomas Gabriel & Sons vs.

Churchill & Sons, (1914) 3 KB
1272
the liability of the del credere
agent is contigent pecuniary
liability, not a liability to perform
the contract. It does not extend to
other obligations of the contract.

SUB- AGENTS (S.191)

When an agent appoints another agent

he is known as SUB-AGENTS.
The appointment of sub- agent is not
lawful as per the maxim delegatus non
potest delegare
if the terms of appointment already
contemplated the appointment of subagents, it can be held valid. In such
cases the sub- agent will be considered
as the principals agent.

SUBSTITUTED AGENTS
Where a principal appoints an
agent and if that agent identifies
another person to carry out the
acts ordered by the principal, then
the second person is not to be
traeted as a sub agent but only as
an agent of the original principal.

SUB- AGENTS
A sub-agent
is appointed
by the agent and as such
he is under the control of
the agent.
A sub-agent acts under
the agent.
There is no privity of
contract between the
subagent and the
principal.
A sub-agent cannot ask
for his remuneration from
the principal.
The principal cannot hold
the sub-agent liable,
except in case of fraud.
An agent is liable for the

SUBSTITUTED
A substituted
agent is only
AGENTS
named by the agent but is
under the control of the
principal.
A substituted agent acts
independently for his
principal.
There is contractual
relationship between the
substituted agent and the
principal.
A substituted agent can
ask for his remuneration
from the principal.
The principal can hold the
substituted agent liable.
An agent is not liable for

CO AGENTS & CO PRINCIPAL

CO AGENTS:
There shall be more than one agent and it
would be necessary for them to act jointly
and only then their principal would be
bound by their actions.
CO PRINCIPAL:
In cases where there are more than one
principal, an agent representing should
account for to all of them jointly. An
account given to one may not absolve him
from his liability.

ESSENTIALS
COMPETENCY (S.183)

S.183: WHO MAY EMPLOY AGENT- 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.

The appointment of an agent involves

a contract, and a minors agreement is
void.
In Shephard v Cartwright, (1953) Ch
728; an infant cannot appoint an
agent to act for him neither by means
of power of attorney, nor by any other
means. If he purports to appoint an
agent, not only is the appointment
itself void, but everything done by the
agent on behalf of the infant is also

The Act doesnt prohibits the

guardian of a minor from
appointing an agent for him.
A power of attorney becomes
worthless when the principal
who executed it becomes
incompetent.
The right to appoint an agent
does not apply when it comes to
personal obligations.

S.184: WHO MAY BE AN AGENT:

as between the principal and
the third party any person may
become an agent, 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 in
that behalf herein contained.

The agent need not be competent to

contract since agents incurs no personal
liability while contracting for his
principal.
Hence in case of a minor agent, he will
not be responsible to the principal.
A company can act as an agent beyond
its capacity (ultra vires).

CONSIDERATION
(S.185)
An agent is remunerated by
way of his commission for
services rendered, but no
considereation necessary at
the time of making
appointment.

AGENCY AND OTHER

RELATIONS

AGENTS AND SERVANTS

LAKSHMINARAYAN RAM GOPAL &SONS vs HYD GOVT,
(1954), Justice Bhagwati has laid down ceratin points of
distinction:
AGENTS
Acts on behalf of principal
and effects contractual
relations
According to the direction
of principal.
Receives commission
Liable only wrongdoings
within the scope of
authority.
Several principals at the
sametime

SERVANTS
No representation
According to the direct
control and supervision of
the master.
Salary/ wages
Liable for every wrongful
act in the course of
employment
Ususally only one master

AGENTS AND BAILEE

Agent is a representative of his
principal while bailee is jus a
person having the possession of
bailors goods.
UNITED COMMERCIAL BANK v
HEMA CHANDRA SARKAR (1990)

AGENTS AND BUYER

An agent who buys goods for his
principal and an independent buyer
are entirely different from each
other in the legal sense.

CREATION OF AGENCY
BY EXPRESS APPOINTMENT
BY IMPLIED AUTHORITY
By holding out
By estoppel
BY NECESSITY
BY RATIFICATION

BY EXPRESS APPOINTMENT
(S.187)

The appointment of agency may be

expressed in writing or it may be in oral.
In English law no man can become the
agent of another except by the will of
that other person.
The relationship of principal and agent
can only be established by the consent of
the principal and agent.
An oral appointment is also valid even
though the contract which the agent is
authorised to make has to be in writing.

BY IMPLIED AUTHORITY
(S.187)
It arises from the conduct, situation or

relationship of parties.
A person places another in a situation in which
that other is understood to represent or to act for
him, he becomes an implied agent.
Illustration: A living in Bombay, owns a shop in
Madras and he occasionally visits it. B is
managing the shop and is in the habit of ordering
goods from C in the name of A for the purpose of
the shop and of paying to them out of As funds
with As knowledge. B has an implied authority
from A to order goods from C in the name of A for
the purpose of the shop.

By holding out
Where a master usually sends his servant to pledge his
credit for certain purpose, he is bound by the acts of the
servant for similar purposes though done without his
consent
By estoppel
When one man by words or conduct causes another to
believe that some other person is his agent and that
another person had acted on that belief, he would be
stopped from denying the authority of that another
person to act on his behalf.
illustration:A tells B in the presence and within the
hearing of P that he (A) is Ps agent and P does not
contradict this statement. B, on the faith of this
statement, subsequently enters into a contract with A,
taking him to be Ps agent. P is bound by that contract.

KASHINATH DAS v NISAKAR ROUT, (1962)

FACTS: A landlord appointed a tahsildar to
manage his agricultural lands. He let out
the lands to tenants on certain terms.
ISSUE: whether the tenancy agreements
would bind the landlord.
HELD: the landlord, by making the tahsildar
incharge of the lands, created an
appearance of authority which according to
the prevailing usages, included the right to
let.

BY NECESSITY

Sometimes, exigencies of
circumstances require a man to act for
another as an agent, though not
appointed as such.

The principle had its origin in marine

adventures. In the course of a marine
adventure, unforeseen emergencies
may arise wherein the master of the
ship is not able to communicate with
the cargo owner. In such situations the
master of the ship gets the power to sell
the goods in order to save their value.

Sims & Co v Midland Rly Co, (1913)

4 KB 103
FACTS: A quantity of butter was
consigned with the defendant
railway company. It was delayed in
transit owing to a strike. The goods
being perishable the company sold
them.
OBSERVATION: the companys
action was justified by the
necessities of the case and it was
also not practicable to get

GREAT NORTHERN RLY CO v

SWAFIELD, (1874)
FACT: a horse having being consigned
with the defendant company, was not
received by anyone at the destination,
the company had no arrangement of
its own to keep animals and,
therefore, placed the horse with a
stable- keeper.
OBSERVATION: the companys action
was held to be reasonably necessary
in the circumstances and therefore,
the company was allowed to recover
the charges of the stable keeper.

PRE EXISTING AGENCY

NOT NECESSARY
Earlier status
Present situation
RELIEF OF INJURED
PERSON

Conditions for the

application of the principle
of necessity

1.Inability to communicate with the principal.

Illustration: As omnibus was driven by his
servant. A policeman thinking that the
driver is drunk, ordered him to discontinue
driving, the omnibus being only a quarter
of a mile from the defendants' yard. The
driver and the conductor authorised a
person who happened to be standing by to
drive. Out of negligence he caused injury
to B. B cannot initiate proceedings against
the owner. (Gwilliam v Twist)

2. Action should be reasonably necessary.

Eg: danger, distance, accomodation,
expense, perishable, other emergencies.
Illustrations: A allowed B to store certain
furniture in his house free of charge.
Thereafter they lost touch with each
other. Some years later A needed the
space taken up by the furniture and
wrote letters to B. A received no reply
and hence he sold the furniture.
Afterwards B claimed the furniture. A
was held liable since there was no
emergency. (Sachs v Milkos)

3. Bona fide in the interest

of party concerned.

BY RATIFICATION

Section 196 of the Indian Contract Act lays

down that where acts are done by one
person on behalf of another, but without his
knowledge of authority, he may elect to
ratify or to disown such acts. If he ratifies
them the same effects will follow as if they
had been performed by his authority.

Duties of agent

DUTY TO COMMUNICATE WITH

PRINCIPAL

Duty to use all reasonable

diligence of communicating with
his principal, and in seeking to
obtain his instructions.
Jayabharathi Corpn v
S.V.P.N.S.N. Rajasekara Nadar
(1993)

DUTY TO AVOID CONFLICT OF

INTEREST

S.213- DUTY TO MAINTAIN

ACCOUNTS
AN AGENT BOUND TO RENDER
PROPER ACCOUNTS TO HIS
PRINCIPAL ON DEMAND
The agents obligation to maintain records
and to provide inspection arises out of the
agency relationship and not by the creation
of the contract.
The duty survives the termination of the
contract.

CAN AN AGENT INSTITUTE A SUIT FOR

ACCOUNTS AGAINST THE PRINCIPAL?

No provision in the Act enables an

agent to institute such a suit.
NARANDAS v PAPPAMMA(1967)Provisions of Contract Act not
exhaustive in this regard and this right
is an equitable right arising under
special circumstances.

RAMLAL v ASIAN COMMREL, (1933)- the

right to claim a statement of accounts is an
unusual form of relief, only granted in certain
specific cases and is only to be claimed when
the relationship between the parties is such
that this is the only relief which will enable the
claimant to satisfactorily assert his legal
rights

STATE OF T.N vs ALAGIR

SUBRAMANIAM (1988)- {take overlosing accounts- no relief since no
proof of loss.} agent is supposed to
provide enough proof of loss of his
GULABRAI v INDIA EQUITABLE INSURANCE
accounts
Co, (1937)

an agent has no statutory right to the account

from his principal except for particular
circumstances.
But if agents is found not having his account
due to his fault, he should not be granted the
relief he claims

A suit for specific sum of

money not a suit for
accounts other than for
exceptional cases.

DUTY NOT TO DELEGATE (S.190)

DELEGATUS NON POTEST
DELEGARE
JOHN Mc CAIN and Co v Pow
(1975)- unless so authorised by
the principal, an agent has no
right to appoint a sub-agent and
delegate to him his powers which
require special skill and care.

S.190: WHEN AGENT CANNOT

DELEGATE: an agent cannot
lawfully delegate when he has
undertaken to perform personally

EXCEPTIONS WHEREIN AGENT

MAY DELEGATE THE WORK:
NATURE OF THE WORK
TRADE CUSTOM
MINISTERIAL ACTION
PRINCIPALS CONSENT- Sub-agents

S.191- Definition for SUBAGENTS

Employed and
acting under the
control of original
agent.
RELATION
BETWEEN
PRINCIPAL AND
AGENT

Bound by all duties of

an ordinary agents
and cannot go beyond
those of the main
agent

IMPROPER
DELEGATIO
N
PROPER
DELEGATIO
N

S.193:IMPROPER
DELEGATION
Unauthorised
Principal not bound by his
appointment and acts
Principal not represented by
a sub-agent
Agent responsible to the
principal for sub-agents acts
Agent stands in the position
of principal for a sub-agent

S.192: PROPER
DELAGATION
EFFECTS OF THE APPOINTMENT
Principal represented by SubAgents
Agents is responsible for Sub-Agent
except for fraud or wilful wrong
Sub-agents not directly liable to the
principal except for fraud and wilful
conduct

CALICO PRINTERS ASSN v

BARCLAYS BANK (1931)- A sub-agent
failed to insure the principals goods,
which were destroyed by fire. But the
principal could not recover against the
sub-agents since it was mere
negligence. The court held even
where the sub-agent is properly
employed, there is no privity of
contract between him and principal.
SUMMAN SINGH v N.C BANK OF
NEWYORK, (1952)

S.194 and 195:

SUBSTITUTED AGENTS
S.194: RELATION
BETWEEN PRINCIPAL
AND SUBSTITUTED
AGENTS: when an
agent has an express
and implied authority
of his principal to
name a person to act
for him and agent
accordingly named a
person, he becomes
an agent for the
principal.

S.195: AGENTS DUTY

IN NAMING SUCH
PERSON: an agent is
bound to exercise the
same amount of
discretion as a man of
ordinary prudence
would exercise in his
own case and in this
case he will not be
responsible to
principal for the acts
or negligence.

SUB- AGENTS
A sub-agent
is appointed
by the agent and as such
he is under the control of
the agent.
A sub-agent acts under
the agent.
There is no privity of
contract between the
subagent and the
principal.
A sub-agent cannot ask
for his remuneration from
the principal.
The principal cannot hold
the sub-agent liable,
except in case of fraud.
An agent is liable for the

SUBSTITUTED
A substituted
agent is only
AGENTS
named by the agent but is
under the control of the
principal.
A substituted agent acts
independently for his
principal.
There is contractual
relationship between the
substituted agent and the
principal.
A substituted agent can
ask for his remuneration
from the principal.
The principal can hold the
substituted agent liable.
An agent is not liable for

Q1: A directs B, his solicitor, to sell

estate by auction, and to employ an
auctioneer for the purpose. B names
C, an auctioneer, to conduct sale. Who
is C here?

Remedies of principal for

breach of duty
1.To ask for accounts and
illicit or secret profits
2.To seek damages for the
breach of terms of contract
and for want of skill and
care
3.To resist the claim of an
agent for commission.

RIGHTS OF
PRINCIPAL

Recover damages from agent if he

disregards directions of principal
Obtain accounts from agent
Recover moneys collected from by agent on
behalf of principal
Obtain details of secret profit made by agent
and recover from him
Forfeit remuneration of agent if he
misconductsthe business.

RIGHTS OF
AGENT

RIGHT OF RETAINER
Agent has a right to retain his principals
(S.217)
money for his claims in respect of his
remuneration or advances made or
expenses incurred in the business of
agency are paid.
Right can be exercised on any sum of
money
Only such money in his possession can be
retained except for vakil and solicitors.

RIGHT TO COMPENSATION
(S.225)
Every principal has a duty not to
expose the agent to unreasonable
risks.
Illustration: A employs B as a
bricklayer in building house, and puts
up the scaffolding himself. The
scaffolding is unskilfully put up, and
B is in consequence hurt. A must
make compensation to B.

RIGHT TO INDEMNITY (S.222 &

233)
S.222: AGENT TO BE INDEMNIFIED AGAINST
CONSEQUENCES OF ALL LAWFUL ACTS

Indemnity against the

consequences of all lawful
acts in conduct of
business.
it extends to all losses and expenses
incurred by the agent in the conduct of
the business.

Wagering Agreement: Agent is allowed to recover the

damages

Apparently Lawful: Agent entitled to

indemnity

Dishonoured Cheque: J RAMRAJ v ILIYAZ

KHAN
(2007)

S.223: AGENT TO BE INDEMNIFIED AGAINST

CONSEQUENCES OF ACTS DONE IN GOOD
FAITH

ADAMSON v JARVIS (1827)

Jarvis, the principal directed the agent,
an auctioneer to sell certain cattle
which actually belongs to another
wherein the auctioneer was unaware of
the facts. The true owner held the
agent liable. The agent later claimed
indemnity from principal. He was held
entitled for the same.

S.224: NON- LIABILITY OF EMPLOYER OF AGENT

TO DO A CRIMINAL ACT.

Agent indulging in unlawful acts

knowingly not entitled to
indemnity
Eg: libel, beating a person etc

RIGHT OF LIEN (S.221)

S. 221: AGENTS LIEN
ON PRINCIPAL
PROPERTY
GOODS,
PAPERS,
IMMOVABLE
AND
MOVABLE
PROPERTY

UNTIL AMOUNT
DUE FOR
COMMISSION,
DISBURSEMENT
AND SERVICES
HAS BEEN PAID

CONDITIONS FOR THE

RIGHT:
1.AGENT LAWFULLY ENTITLED
TO RECEIVE THE MONEY FROM
PRINCIPAL
2.GOODS BELONGING TO THE
PRINCIPAL AND POSSESSION
GOT BY THE AGENT THROUGH
THE CONDUCT OF BUSINESS.
3.ONLY PARTICULAR LIEN

If the agent becomes a pledgee, he

may sell them after giving a
reasonable notice to the principal
Right to lien effective only to the
extent of the principals rights on the
property.

LOSS OF LIEN
RIGHT TO LIEN LOST WHEN
POSSESSION IS LOST
WHEN AGENT WAIVES HIS RIGHT
EITHER BY AN EXPRESS OR IMPLED
AGREEMENT OR EVEN INFERRED FROM
HIS CONDUCT
CONTRACT TO CONTRARY

HUSBAND AND WIFE

WIFE HAS AN IMPLED
AUTHORITY TO BE HER
HUSBANDS AGENT

CONDITIONS:
1.LIVING TOGETHER
2.DOMESTIC
ESTABLISHMENT-

Debenham v Mellon
(1880)

Wife can run her husband into debt only for

necessaries without ambiguity
Husband will not be liable if he makes a
reasonable allowance to his wife.
-Girdhari Lal v Crawford (1885): the
Allahabad HC held that husband can
discharge his liabilities if:
a)He expressely warned the tradesman not
to supply goods on credit
b)Wife already supplied with sufficiency of
articles in question
c)Wife already supplied with sufficient
means for the purpose of buying the
articles without pledging the husbands
credit.

Husband has no implied power

to act as his wifes agent
Only through proper ratification
Wife not liable to a contract
made by her husband without
her authority.

AGENTS
AUTHORI
TY

THE ACTS OF THE AGENT WITHIN

THE SCOPE OF HIS AUTHORITY BIND
THE PRINCIPAL

S.226 gives the statutory

effect to the above principle

S.226: ENFORCEMENT AND

CONSEQUENCES OF AGENTS
CONTRACTS

ALL ACTS DONE BY THE AGENT WILL

HAVE THE SAME LEGAL
CONSEQUENCES AS IF THE SAME HAS
BEEN DONE BY THE PRINCIPAL IN
PERSON
QUI FACIT PER ALIUM FACIT PER SE

ACTUAL AUTHORITY
EXPRESS

IMPLIED

S.1
86
&
S.1
87

S.186

S.187

AGENTS
AUTHORITY MAY
BE EXPRESSED
OR IMPLIED
DEFINITIONS OF
EXPRESS AND
IMPLIED
AUTHORITY

EXPRESS
AUTHORITY
Words
spoken or
written

Acted outside the scope of authority

but under good faith:
ATTWOOD v MUNNINGS, (1872)
REID v RIGBY, (1894)2 QB 40

WHERE THIRD PARTY HAS

KNOWLEDGE OF THE LIMITATION
ON THE AGENT

PRINCIPAL NOT BOUND

BY THE LIABILITY.

BORROWING MONEY BY
AGENT
Without a clear authority
agent has no authority to
borrow
Even if the agent borrows
beyond the authority, the
third person can claim from
principal since third party
has no means to ascertain it

IMPLIED
AUTHORITY
Inferred
from
circumstanc
es

RYAN v PILKINGTON,
(1959) 1 WLR 403

S.188: EXTENT OF AGENTS

AUTHORITY
Agent has an authority to do
every lawful thing which is
necessary for the purpose.

The nature
of the act
or business
he is
appointed
to do

Things
which are
incidental
to the
business or
are usually
done in
carrying it

The usual
customs
and
usages of
the trade.

Thus every agent has the

implied authority to act
according to the customs
and usages of a particular
market or trade and
principal is bound by such
usages even if he is
unaware of them or even if
they conflict with his
instructions.

DINGLE v HARE, (1859)7 CB

145

An agent was authorised to sell artificial

manure. He had no authority to give any
warranty about the goods. Yet he warranted to
the buyer that the manure contained 30%
phosphate of lime. The warranty turned out to
be false and the principal was sued for its
breach,.
Principal was held liable since it was usual in
the artificial manure trade to give a warranty of
this kind

The principle of DINGLE v HARE, applies to all

cases where the agent acts as a seller.
Eg: horse-dealer
Agent to sell a property

UNLAWFUL OR UNREASONABLE CUSTOM

OR USAGE:
Whether a custom or usage is unlawful is a
question of law.
Any custom which changes the nature of the
agency is unreasonable.

DOCTRINE OF OSTENSIBLE
AUTHORITY (S.237)
It appears to others that there is
an authority.
It coincides with the actual
authority
When an
agents
act was
within the
scope of
his
authority

The act
appeared
to be
authorise
d

IMPLIED AUTHORITY
OSTENSIBLE AUTHORITY

Implied authority is real authority which

binds principal agent and third party.
The term ostensible authority denotes no
authority.
It is without actually giving him any
authority either express or implied by which
appearance of authority a third party is
misled into believing that a real authority
exists.

STATUTORY PROVISION FOR

APPARENT AUTHORITY

S.237: LIABILITY OF PRINCIPAL

INDUCING BELIEF THAT AGENTS
UNAUTHORISED ACTS WERE
AUTHORISED

ACTUAL OR CONSTRUCTIVE NOTICE OF LACK OF

AUTHORITY

Just and reasonableness:

The ultimate question whether the
circumstances caused loss to an
innocent third party has to be
decided by the court of law
analysing the reasonableness in
the circumstances.

AGENTS AUTHORITY IN AN
EMERGENCY (S.189)

To do all such acts for the

purpose of protecting his
principal from loss as would be
done by a person of ordinary
prudence in an emergency
situation.

S.189 creates a

S.227: PRINCIPAL HOW FAR

BOUND, WHEN AGENT EXCEEDS
AUTHORITY

If the part
which he done
within his
authority can
be seperated
from the part
he done
outside the
authority

THEN

Principal
bound by
the act done
within his
authority

S.228: PRINCIPAL NOT BOUND

WHEN EXCESS OF AGENTS
AUTHORITY IS NOT SEPERABLE

If the part
which he done
within his
authority
cannot be
seperated
from the part
he done
outside the
authority

THEN

Principal not
bound to
recognize
the
transaction
and may
repdiate the
same.

S.229: CONSEQUENCES OF NOTICE

GIVEN TO AGENT

The notice and information obtained by the agent in the

course of business on behalf of his principal shall have
same legal consequences as it is obtained by the
principal himself.

Eg:
secretary of a society
binder

S.238: EFFECT ON AGREEMENT,OF

MISREPRESENTATION OR FRAUD BY AGENT

Misrepresentations made , or frauds

committed by agents in the course of
business within his scope of authority have
the same effect as committed by the
principal himself
Has to within the course of
business (vicarious liability)
Has to be within the authority
EXCEPTION- Exaggeration by
the agent

FULLER v WILSON, (1842)3 CB 58

L.C.B. GOWER criticised the decision as

one that is socially undesirable and
logically unsatisfying. He stated the
position in english law as:
The principal can be held liable if:
1.He intends or knowingly permits the
agent to make a false statement, or
2.His agent acting within the actual or
apparent scope of his authority makes
a statement with knowledge of his
falsity or recklessly not caring whether
it be true or false.

AGENTS TORTS
The doctrine of respondeat
superior let the superior
answer
1.BARWICK v ENGLISH JOINT
STOCK BANK, (1867) LR 2 Ex
259- the principal would not
be liable where the agent
committed a tort for the benefit
of the agent.
2.LLOYD v GRACE SMITH & CO,

THIRD PARTYS PROTECTION

WHEN PRINCIPAL BECOMES
ANONYMOUS

DOCTRINE OF UNDISCLOSED
PRINCIPAL
A principal whose existence is unknown to the
third party with whom the agent deals and so,
in the eyes of the third party, the agent is the
principal
Common law doctrine on undisclosed
principals confers rights and imposes liabilities
on the undisclosed principal, notwithstanding
that he is not made a party to the relevant
contract. This doctrine is an exception to the
general rule that only a party to a contract
may sue and be sued thereon.

The rules under this particular doctrine may be

illustrated by considering the respective relationships
between the principal and the agent, the principal and
the third party, and the agent and the third party.

Undisclos
ed
principal
and
agent

Undisclos
ed
principal
and third
party

Agent
and third
party

Undisclosed principal and

agent
Basically the same as in a disclosed
principal situation
The agent is to be treated as a
trustee for the undisclosed principal
of any goods or payments received
or any benefit that he derives from
the contract with the third party and
is liable to account to the principal
for such goods, payment or benefit,
as in the case of the disclosed
principal.

Undisclosed principal and third

party
The agent must have actual authority,
whether express or implied, to enter
into the contract in question with the
third party; and
The agent on entering into the
contract with the third party must have
intended to act on behalf of the
undisclosed principal, not for his own
benefit.

The rules governing the rights and liabilities

between the undisclosed principal and the third
party are as follows:
1. Generally, an undisclosed principal can sue and be
1. Generally, an undisclosed principal can sue and be
sued by the third party under the contract .
2. An undisclosed principal remains liable to a third
party for the price of goods sold or services
provided under the contract made in the agent's
name with the third party. The undisclosed
principal's liability will not be discharged even if he
has made payment to the agent with instruction
that the agent pays over the same to the third
party, if the agent fails to pay the third party as
instructed.
3. Where the existence and identity of the principal is
disclosed and where the third party is to take action
for recovery of any amount payable to him under
the contract, the third party can elect to sue either
the undisclosed principal, or the agent.

Agent and third party

An agent who enters into a contract with a third

party, without disclosing that he is in fact entering
into the contract on behalf of a principal, will be
treated as the principal by the third party.
When the existence and identity of the principal is
disclosed, the third party is entitled to elect
(choose) whether to sue the principal or the agent.
If the third party elects to sue and obtains
judgment against the principal, the third party will
not be entitled to sue the agent, even if the third
party cannot recover any damages from the
principal.
If, in respect of the contract, the undisclosed
principal himself sues the third party or settles
with the third party, then the agent cannot sue the

The doctrine is often described as a surprising but

well- established by the cases
The doctrine of the undisclosed principal has been
classified as an anomaly because it runs counter to
the principle of privity of contract, which is the
contract law rule under which only parties to a
contract are legally bound by and entitled to enforce
it.The doctrine of the undisclosed principal allows the
principal to sue and be sued on the contract even
though the principal is not on the face of it a party to
the contract and, at the same time, the agent may
also sue and be sued on the contract.
Lord Lindley inKeighley, Maxstead & Co v
Durant[1901] AC 240, declares that the explanation
for the doctrine of undisclosed principal is because
the contract is in truth, although not in form, that of
the undisclosed principal himself.

S.231: RIGHTS OF PARTIES TO A CONTRACT

MADE BY AGENT NOT DISCLOSED.

AGENT WILL
HAVE THE
SAME RIGHTS
AS A
PRINCIPAL

IF BEFORE THE
COMPLETION OF
CONTRACT
PRINCIPAL
DISCLOSES TO
THIRD PARTY,
HE MAY REFUSE
TO FULFIL THE
CONTRACT

S.232: PERFORMANCE OF CONTRACT WITH AGENT

SUPPOSED TO BE PRINCIPAL.

If the principal 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 set-off clause refer to a

settlement of mutual debt
between a creditor and a
debtor through offsetting
transaction claims.

Illustration: A, who owes 500 rupees

to B sells 1000 rupees worth of rice
to B. A is acting as agent for C in the
transaction, but B has no knowledge
nor reasonable grounds of suspicion
that such is the case. C cannot
compel B to take the rice without
allowing him to set-off As debt.

But if the third party does not believe

the agent to be a principal or there are
suspicious circumstances he may not be
able to claim a set-off.

Cook v Eshelby, (1887) 12 App Cas

271

Third partys right to repudiate

executory contract

Said v Butt, (1920)3 KB 497

Intervening of undisclosed principal against

express terms- an undisclosed principal not
entitled to intervene into a contract if it has been
expressly mentioned in terms of the contract.

AUTHORITY OF SPECIAL
AGENTS

FACTOR:
Merchantile agent who is
in the possession of goods
Authority to sell them, to
warrant them, to fix the
selling price and to receive
payment.

BROKER
Merchantile agent to sell
principals goods but no
possession is given.
In an undisclosed
agency he can sell the
goods in his own name
and receive the payment
If he is revealing an
undisclosed principal then
he cannot receive the
payment.

ESTATE OR HOUSE AGENT

Different position from broker and
vested with more power.

AUCTIONEER
An agent appointed to sell
goods at a public auction.
No authority to sell by private
contract.
He acts both for buyer and
seller.

POWER OF ATTORNEY HOLDER

When a matter has to be done
personally.

PERSONAL LIABILITY OF
AGENT - S.230

S.230

In the absence of any contract

to that effect, an agent cannot
personally enforce a contract
entered into by him on behalf
of his principal, nor is he
personally bound by them.

PRESUMPTION OF CONTRACT TO
CONTRARY

MERCHAN
T
RESIDENT
ABROAD

PRINCIPAL
WHOSE
NAME
NOT
DISCLOSE
D

PRINCIPAL
THOUGH
DISCLOSE
D
CANNOT
BE SUED

FOREIGN PRINCIPAL

ORIGIN- for merchantile

inconvenience
Once principal sued for a
cause, the agent cannot be
held liable for the same.

UNNAMED PRINCIPAL

Where the personal liability of the

agent is definite in the case of
undisclosed principal, there is only a
presumption in the case of unnamed
principal.
Also, the knowledge of third party
regarding the representative character
has to be considered.
In every case of unnamed principal,
the nature of the contract acts as the
deciding factor
N&J VLASSOPULOS v NEY SHIPPING LTD,

INCOMPETENT PRINCIPAL

CIRCUMSTANES:
MINOR- agent will be personally
liable. But if third party aware of
the fact then agent cant be held
liable
Promoters of a projected
company
Directors of a company- an
exception

S.233: RIGHT OF PERSON DEALING

WITH AGENT PERSONALLY LIABLE
THE THIRD
PARTY MAY
HOLD EITHER
AGENT OR THE
PRINCIPAL
LIABLE.

CRITICISED

The third party

may elect and
the election
shall be final
and binding

S. 234: ESTOPPEL OF THIRD

PARTY

If the third party leads

the agent or the
principal to believe
that they will be liable,
he cannot change his
stance afterwards.

S.235- PRETENTED AGENT

If no ratification from
the principal, the
agent will be liable to
the third party.

DOCTRINE OF
RATIFICATION

RATIFICATION S.196

Done an act without

Ps authority

P
DISOW
N

OR

RATIFY

Instances:
1.INSURANCE
2.LENDING MONEY

S.197: Ratification may be

expressed or implied

1.On
behalf of another
Keighley, Maxeted
REQUIREMENTS
OF RATIFICATION
& Co v Durant (1901)AC 240
2.Competence of principal- (eg: minor,
projected company(subjected to
exceptions))
3.Acts should be lawful (S.200)
. Unlawful acts
. Acts which would become injurious(eg:
termination of lease)
. Acts done on behalf of government
1.Knowledge of facts by the principal
(S.198)
2.Whole transaction has to be

EFFECTS OF RATIFICATION:
P
P

Contract of
agency
Effected contract

A
T

DOCTRINE OF RELATION BACK

Ratification relates back to the
date on which the agent first
contracted.

BOLTON PARTNERS v LAMBERT, (1889)41

Ch D 295

WATSON v DAVIES, (1931) 1 Ch 455

Not applicable if the third party already

aware of the fact that the contract is
subjected to ratification

BOLTON PARTNERS v LAMBERT,

(1889)41 Ch D 295
An offer of purchase was made by the Defendant,A.
J. Lambert, toP. A. Scratchley, who was acting as an
agent of the Plaintiffs,Bolton Partners (Limited), but
was not authorized to make any contract for sale on
8th of December, 1886. The offer was accepted
byScratchleyon 9thof December on behalf of the
Plaintiffs with a direction that the companys solicitor
had been instructed to prepare the necessary
documents. On the 13th of January, 1887, the
defendant withdrew his offer on the ground that he
had been misled by the statements that had been
made to him as to the value of the property. After the
withdrawal, the Plaintiffs, on 28th of January, ratified
the acceptance of the offer by S.

TERMINATION OF AGENCY
(S.201)

Contract of agency

MODES OF
TERMINATION:
1.REVOCATION
2.RENUNCIATION
3.COMPLETION OF
BUSINESS
4.PRINCIPAL OR
AGENTS DEATH
5.UNSOUND MIND
6.INSOLVENCY OF
PRINCIPAL
7.EXPIRY OF TIME

S.203: WHEN PRINCIPAL MAY REVOKE

AGENTS AUTHORITY.

The principal may, save as is

otherwise provided by the last
preceding section, revoke the
authority given to his agent at any
time before the authority has been
excercised so as to bind the
principal.

save as is otherwise provided by the last

preceding section

S.202: WHEN AGENT IS PERSONALLY

INTERESTED IN THE SUBJECT-MATTER
OF AGENCY THEN SUCH AN AGENCY
BECOMES IRREVOCABLE.
Eg: if the proceeds of the agency is used to
clear the dues of debt by P to A

An agency of this kind cannot be terminated

even by the principals death.

S.204: PRINCIPAL CANNOT REVOKE

THE AUTHORITY OF AGENT AFTER THE
AUTHORITY HAS BEEN PARTLY
EXCERCISED.
Eg: A authorises B to buy 1000 bales of
cotton on account of A, and to pay for it out
of As money remaining in Bs hand. B buys
1000 bales of cotton in his own name, so
as to make himself personally liable for the
price. A cannot revoke Bs authority so far
as regards payment for the cotton.

S.205: LIABILITY TO COMPENSATE FOR ANY

PREMATURE REVOCATION OR RENUNCIATION
WITHOUT ANY SUFFICIENT CAUSE WHEREIN
THERE IS AN EXPRESS OR IMPLIED CONTRACT TO
CONTINUE THE AGENCY FOR ANY PERIOD OF
TIME.

S.206- NOTICE OF
REVOCATION OR
RENUNCIATION
REASONABLE
NOTICE
SHALL BE
PROVIDED
FOR
REVOCATION
OR
RENUNCIATIO
N. LENGTH
OF NOTICE
DEPENDS ON
THE PERIOD

IF NOTICE
NOT SERVED,
LIABLE FOR
DAMAGES

RENUNCIATIO
N BY AGENTS

S.206: RENUNCIATION BY
AGENT
An agent may renounce the business of agency in
the same manner in which the principal has the
right of revocation

1.If agency for fixed period, agent must

compensate principal for any premature
renunciation.
2.A reasonable notice is necessary

S.207: REVOCATION AND

RENUNCIATION MAY BE
EXPRESSED OR IMPLIED

S.201

COMPLETI
ON OF
BUSINESS

DEATH OR
INSANITY

PRINCIPAL
S
INSOLVENC
Y

ON EXPIRY
OF TIME

EFFECTS OF TERMINATIONS.208
THE AUTHORITY OF THE AGENT
ENDS WHEN HE COMES TO KNOW
OF THE TERMINATION.
Illustration: sale made before notice
held as good sale.
AS REGARD TO THE THIRD PERSON, THE AGENCY
DOES NOT TERMINATE UNTIL THEY COME TO
KNOW OF THE FACT OF TERMINATION

S.209: DUTY OF AGENT TO TAKE CARE

OF PRINCIPALS INTEREST WHER
PRINCIPAL HAS DIED OR BECOME A
PERSON OF UNSOUND MIND.

S.210: WHEN THE AUTHORITY OF AN

AGENT TERMINATES, IT TERMINATES THE
AUTHORITY OF THE SU-AGENTS ALSO.