CONTRACTS 2 theory

Question 1

section 124

Answer 1

A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity

Question 1

sec125

Answer 1

extent of liability- indemnifier must pay all sums, costs, and all damages- these are also the rights of the indemnity holder

Question 2

sec 126

Answer 2

defines terms of contract of guaranteee Contract of guarantee”, “surety= person giving guarantee”, “principal debtor= the one whos default will enact guarantee” and “cred
itor= the one to whom money is owed or wtv”

Question 3

essentials of guarantee

Answer 3

1. principle debt- a recoverable debt between creditor and principle debtor
2. Consideration- for the surety- a benefit to the PD can also be sufficient

Question 4

section abt consideration in contract of guarantee ?

Answer 4

Consideration for Guarantee – Section 127 Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.

Question 5

minors debt liability? guarantee

Answer 5

Nikade v
Narshiv

In India it has been held, following earlier English authorities, that where
a minor’s debt has been knowingly guaranteed, the surety should be held
liable as a principal debtor himself

Question 6

guarantee for past debt

Answer 6

Gulam Husain v M.
Faiyaz Khan - A lessee agreed to pay the sum due under a lease by certain instalments
and after a few days a person executed a surety bondJbinding himself to
pay a certain amount in default of the payment of instalments.
The court held that the bond was not without consideration
criticized by pollock and mulla but past consideration is valid consideration

Question 7

invalidity

Sec 142, 143

also mention a case

Answer 7

S. 142. Guarantee obtained by misrepresentation, invalid
S. 143. Guarantee obtained by concealment, invalid.—Any guarantee
which the creditor has obtained by means of keeping silence as to material circumstances is invalid

The defisndant was invited to give a guarantee for the fidelity of
a servant. The employer had earlier dismissed him for dishonesty, but
did not disclose this fact to the surety. The servant committed another
embezzlement.
The surety w^as held not liable. “The surety believed that he w^as making
himself answerable for a presumably honest man, not for a known thief

London General Omnibus Co v Holloway.

Question 8

The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

section?

Answer 8

Nature & Extent of Surety’s Liability (Section 128)

Question 9

Equal liability of co surety?

Answer 9

in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

section 146

Question 10

section 147

Answer 10

Liability of Co-Sureties bound in different sums (Section 147)
Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

Question 11

Is a Compromise Deed signed between the Creditor and the Principal Debtor binding upon the Surety?

Answer 11

Under the guarantee clause, the guarantor (surety) agreed to be bound by any judgment or award obtained by the Creditor Bank against the Principal Debtor.
The Supreme Court held that a settlement or compromise between the Creditor Bank and the Principal Debtor was binding upon the guarantor.
The mere absence of knowledge on the part of the guarantor of the joint settlement memo was of no consequence.

CASE: Central Bank of India vs CL Vimla

Question 12

Discharge of surety

Answer 12

By Revocation (Section 130)
By Death (Section 131)
By Variance in Terms of Contract (Section 133)
By Release or Discharge of Principal Debtor (Section 134)
When the Creditor gives time to or agrees not to sue the Principal Debtor (Section 135)
When the Creditor’s act or omission affects the surety’s remedy (Section 139)
By Loss of Security by the Creditor (Section 141)
By Novation (Section 62)

Question 13

types of variance in guarantee contracts

Answer 13

Substitution of the original contract between the creditor and principal debtor.
Where the variance in terms is prejudicial to the surety.
Where the variance is not beneficial to the surety.
Where the variance is not prejudicial to the surety
Where there is invalid variance in the terms of contract.
Where the surety has consented to variance.

Question 14

rationale behind sec 134

Answer 14

Discharge of Surety by Release or Discharge of Principal Debtor (Section 134)

The liability of surety is co-extensive with that of the principal debtor. Therefore, if the principal debtor is discharged by the creditor, the surety is automatically discharged.
The release of principal debtor by the creditor adversely affects the right of the surety to sue the principal debtor.

illus:) A contracts with B for a fixed price to build a house for B within a stipulated time, B supplying the necessary timber. C
guarantees A‟s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.

Question 15

Discharge of Surety by Loss of Security by the Creditor

Answer 15

sec 141
A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not.
If the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

CRAYTHORNE v SWINBURNE

Question 16

rights of surety

q

Answer 16

sec140- right of subrogation= surety takes over the position of creditor once payment is done
sec141- surety has right against creditor to get all securities
sec145 right to indemnity
RIght against co surety
sec138- release of one co surety not release all but released co surety is still liable to other co sureties
sec146-147= right to contribution in equals, or 147 right to contribution to the sums that they are bound in.

right b4 payment also exists if PD is trying to go broke

Mamata Ghose v United Industrial Bank, Craythorne v Swinburne,

Question 17

Section 140

Answer 17

Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

This Section gives the surety the right to claim reimbursement from the principal debtor.

Question 18

suretys Right to Recover Money from the Principal Debtor

Answer 18

In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but, no sums which he has paid wrongfully.

Sec145

This Section also gives the right of reimbursement to the surety.

Question 19

sections dealing w indemnity

Answer 19

sec124, 125

Question 20

sections for gurantee

Answer 20

sec127-147

Question 21

sections for discharge

Answer 21

133- variance, 134- release of pd, 135-when creditor compounds with, gives time to, or agrees not to sue, principal
debtor, 139-creditor‟s act or omission impairing surety‟s eventual remedy

not discharged
136- . Surety not discharged when agreement made with third person to give time to principal debtor
137-. Creditor‟s forbearance to sue does not discharge surety.
138.Release of one co-surety does not discharge others

Question 22

Duty of Bailor

Answer 22

Duty to disclose faults in the goods bailed (Section 150); to repay necessary expensis when bailemtn for benefit of bailor (158)

Duty to indemnify the bailee when there is restoration of goods lent gratuitously
158- (Section 159); and
Duty of bailor when he has no title (Section 164).

Question 23

duties of bailee

Answer 23

Duty to take reasonable care of the goods bailed (Sections 151 & 152);
Duty not to make unauthorized use of the goods bailed (Sections 153-termination & 154-liability if damage);
Duty not to mix the bailor’s goods with his own goods (Sections 155-with consent, 156 nc-goods can be seperated 157-nc,cannt be seperated);
Duty to return the goods on fulfillment of purpose (Sections 160 – 161, 165-several joint owners- deliver to any one unless contract states contrary);
Duty not to set up Jus Tertii (Sections 166 & 167);
Duty to deliver to the bailor the increase or profit on the goods bailed (Section 163).

Question 24

sec153

Answer 24

Termination of bailment by bailee’s act inconsistent with conditions (Section 153)
A contract of bailment is avoidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment.

Question 25

sec155-157

Answer 25

A bailee should not mix the bailor’s goods with his own goods without the bailor’s consent.
If the bailor consents, the bailee can mix the bailor’s goods with those of his own.
In such a case, the bailor and the bailee shall have an interest in the mixed goods in proportion to their respective shares.

Effect of mixture, without bailor’s consent, when the goods can be separated (Section 156)- if goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture.

Question 26

Effect of mixture, without bailor’s consent, when the goods cannot be separated

Answer 26

(Section 157)
If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, in such a manner that it is impossible to separate the goods bailed from the other goods, and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.

Question 27

Duty to return the goods on fulfillment of purpose

Answer 27

Sections 160 – 161, 165 – 167)

sec161-
If, by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.

Shaw & Co. vs Symmons

Question 28

sec165

Answer 28

bailment by several joint owners
If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all in the absence of any agreement to the contrary.

Question 29

Sections 166 & 167

Answer 29

A bailee is not allowed to set up as against the bailor’s demand, the defence of Jus Tertii, i.e., the goods belong to a third person.
165
The bailee is estopped from denying the right of the bailor to bail the goods and to receive them back.
Even if there is a person who has a better title to the goods than that of the bailor, or who claims ownership over the goods, the bailee may safely return the goods to the bailor.

furthermore, according 166-
If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of such delivery.
sec 167- the other person who claims better title to the goods must go to court for an order

Duty not to Set Up Jus Tertii

Question 30

Duty to deliver to the bailor the increase or profit on the goods bailed (Section 163)

Answer 30

Duty to deliver to the bailor the increase or profit on the goods bailed

In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.
ex cow gives birth to calf so baliee has to return both cow and calf

Question 31

rights of bailee

Answer 31

Right to recover necessary expenses incurred on Bailment (Section 158). -

Right to recover compensation from the bailor (Section 164).
Right to have a Lien on the goods bailed (Sections 170 & 171).
Right to sue a wrongdoer (Section 180).

Question 32

section 158

explain in depth

Answer 32

if its non gratitous- bailee can reserve right to lien and retain goods until remuneration
ex: give car for fixing so garage (bailee) can retain car till money paid
gratuitous bailment, the bailee is not entitled to receive any remuneration from the bailor.
But Sec158, the bailor shall repay to the bailee the necessary expenses incurred by him (bailee) for bailment.
However, if gratuitous bailment is for the benefit of the bailee, then the bailee must bear the expenses incurred by him on the goods.
A leaves his Horse with his neighbor B, for safe custody for one week. B is entitled to recover the expenses incurred by him in feeding the Horse.
A lends his Horse to B for a journey from Calcutta to Patna, without claiming any charge. B must bear the expense of feeding the Horse during the journey.

Question 33

Bailor’s responsibility to Bailee

Answer 33

sec164
The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.

Question 34

Right to have a Lien on the Goods Bailed

Answer 34

Lien means the bailee’s right of retaining the bailor’s goods.
The bailee can retain the goods of the bailor and refuse to deliver them back until his remuneration for the services rendered in respect of the goods is paid to him.

(Sections 170 & 171)

General Lien (Any property is detained as a security by the bailee for a general balance of account).- not easily granted
Particular Lien (Only that particular property is detained in respect of which the charges are due).sec170

Question 35

Elements of Right of Lien

Answer 35

• The bailee must have rendered some service to the bailor, using his labor or skill;
• Such labor or skill must be used for the purpose of bailment;
• The labor or skill must improve the goods bailed;
• Right of Particular Lien applies only to such goods over which the bailee has used his labor or skill;
• There must not be a contract to the contrary between the parties which excludes the right of lien.

Question 36

Section 171)

Answer 36

Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

have right to general lein

Question 37

sec180

Answer 37

Right to Sue a Wrongdoer (Section 180)
After the goods have been bailed to the bailee, if a third person wrongfully deprives the bailee of their use or possession, or causes an injury to the goods, the bailee can sue such person for the wrong caused to the goods.
The bailor can also sue such third person.
The bailor and the bailee can also jointly file a suit against such third person.

Question 38

sec181

Answer 38

Apportionment of relief or compensation obtained by such suits (Section 181)
Whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.

Question 39

finder bailee

Answer 39

S. 168. Right of finder of goods: May sue for specific reward
offered.—The finderof goods has no rightto sue the ownerfor compensation
for trouble andexpense voluntarily incurred by him to preserve the goodsand
to find out the owner; but he may retain the goods againstthe owner until he
receives such compensation; andwhere the owner has offered a specific reward
forthe return ofgoodslost, the finder may sueforsuch reward, and may retain
the goods until he receives it.
S. 169. When finder of thing commonly on sale may sell it.—When a
thing which is commonly the subject ofsale is lost, if the owner cannot with
reasonable diligence befound, orifhe refuses, upon demand, to pay the lawful
chargesofthe finder, the finder maysell it—
(1) when the thing is in danger ofperishing oroflosing the greater partof
its value, or
(2) when the lawful charges of the finder, in respect of the thing found,
amount to two-thirds of its value

Question 40

sections related to pledge

Answer 40

172-181

Question 41

who can pledge?

Answer 41

Owner or the Person or authorized by him can legally pledge.
exceptions:
Mercantile Agent – S. 178
2. Pledge by a person in possession under voidable contract – S.178A
3. A person having limited interest – S. 179
4. Pledge by co-owner, take his permission., if not then pledge valid only to the extent of your interest.
5. Pledge by a seller in possession of foods after sale, Section 30(1) Sale of Goods Act
6. Pledge by buyer in possession of goods, Section 30(2) Sale of Goods Ac

Question 42

s178?

Answer 42

Pledge by mercantile agent –
Where a mercantile agent is, with the consent of the owner, in possession of goods or
the documents of title to goods, any pledge made by him, when acting in the ordinary
course of business of a mercantile agent, shall be as valid as if he were expressly
authorized by the owner of the goods to make the same; provided that the pawnee
acts in good faith {honestly and not negligently} and has not at the time of the
pledge notice that the pawnor has not authority to pledge.

Question 43

sec179

Answer 43

1. pawnor has only limited interest - by co-owner so only to the extent of their interest if they dont have consent
2. Pledge by seller who is in possession after sale, (Section 30(1) SOG Act) – a
   seller, who is in possession of the goods after sale i.e. A sold the goods to B
   but is still having the possession, as B hasn’t taken the delivery. He can pledge the goods provided the pledgee has acted in good faith and had no notice of the previous sale
3. Pledge by a buyer In possession before sale (Section 30(2) SOG Act) – A buyer who is in possession of the goods, with the consent of the seller, but has not paid the full price can make valid pledge, provided, the pledgee did not have notice of the pawner’s defective title and acted in good faith

Question 44

right of pawnee/pledgee

Answer 44

1. Right to retain the goods – S. 173
2. Right to recover extraordinary expenses – S. 175
3. Right to sue and sell the pledged goods – S. 176

Question 45

s.173

Answer 45

pawnee has right to retain not just for payment of debt or performance but also for all interests on debt + all necessary expenses incurred during possession/ preservation of goods pledged

Question 46

sec 174

Answer 46

Sec 174. Pawnee not to retain for debt or promise other than for which goods pledged – presumption in case of subsequent advances.

Eg. A takes loan from B of Rs. 3000/- to be payable after 6 months and pledges his watch. After
a month he takes another loan of Rs. 1500/-. This subsequent advancement will be with regard
to the same watch and B can retain the watch for this amount of Rs. 1500/- too

Question 47

S. 175.

Answer 47

S. 175. Pawnee’s right as to extraordinary expenses incurred him for the** preservation of the goods pledged**.

Question 47

S. 175.

Answer 47

S. 175. Pawnee’s right as to extraordinary expenses incurred him for the** preservation of the goods pledged**.

Question 48

sec176

Answer 48

Pawnee’s right where pawnor makes default -
“If the pawnor makes default in:
1. payment of the debt, 2. or performance or the promise,
3. Violates the stipulated time in respect of which the goods were pledged,
The pawnee may:
1. bring as suit against the pawnor upon the debt or promise,
2. and retain the goods pledged as a collateral security;
3. or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.

if proceeds of sale are less than the amt due in debt- pawnor still liable to pay balance , and if its gr8r than balance then pawnee shall pay profits to pawnor

Question 49

Duties of the Pawnee

Answer 49

The duties are identical to the bailee:
- take care of the goods pledged as a reasonable and prudent man
- not make unauthorized use of the goods
- not mix the goods with his own without the consent of the pawnor
- duty to return the goods pledged n payment or the performance of the promis

Question 50

rights of redeeming goods pawnor/ pledger

Answer 50

S. 177. Defaulting pawnor’s right to redeem - if it is a tiem stipulated debt and pawnor defaults, he may redeem the goods at any time before ACTUAL sale, but may have t pay additional sums arising from his default’
A pledged his goods to B. A defaulted and B sent a notice stating
that he is willing to sell the goods and the same will be done on 30th of this
month. B has to travel and is unable to sell on the 30th
. A has a right to redeem
his goods?
Yes, A does. He can redeem by paying the debt even after the 30th i.e. till the
actual sale. His right does not extinguish on the 30th

Question 51

hypothecation v pledge and morgage

Answer 51

hypothecations- The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 section 2(n)- possession and ownership w lender
pledge- ICA sec172- posession w pledgee
mortgage- immovable property - The Transfer of Property Act,1882 sec58- possession w debtor, ownership w creditor.

Question 52

AGENCY sections

Answer 52

182- 235 :D

Question 53

auctioneer v factor

Answer 53

An auctioneer is an agent whose business is to sell goods or other property by auction, i.e., by
open sale. The authority vested in him is to sell the goods only, and not to give warranties on behalf of the seller, unless expressly authorised in that behalf- acts in double capacity first for seller but once goods are “knocked down” by the gravel he becomes agent of purchaser too- only has particular lien

factor- A factor is a mercantile agent who is entrusted with the possession of the goods for the purpose
of sale. He is an agent remunerated by a commission, and is entrusted with the possession of goods to sell in his own name as an apparent owner. He has the power to sell goods on credit and also to receive the price from the buyer. He can sell them at such times and at such prices
as he thinks best. An auctioneer resembles a factor in as much as he is always in possession of the goods to be sold. But while a factor has a general lien, an auctioneer has only a particular lien.

Question 54

agent vs servant

Answer 54

An agent has the authority to act on behalf of his principal and to create contractual relations between the principal and a third party. This kind of power is not generally enjoyed by a servant.
2. A principal has the right to direct what the agent has to do; but a master has not only that right, but also the right to say how it is to be done. A servant acts under the direct control and supervision of his master
3. servant will usually work for wages, and agent = comission
4. A master is liable for a wrongful act of his* servant* if it is committed in the course of the servant’s employment. A principal is liable for his agent’s wrong done within the “scope of
authority

Lakshminarayan Ram GopalLtd v Govt of Hyderabad

Question 55

features of agency

Answer 55

1. The principal should be competent to contract (Section 183)
2. The agent may not be competent to contract (Section 184)
3. No consideration is necessary to create an agency (Section 185)

Question 56

authority of agent

Answer 56

188. Extent of agent‟s authority.- An agent having an authority to carry on business has authority to do every lawful
     thing necessary for the purpose, or usually done in the course of conducting such business.
189. Agent‟s authority in an emergency. authority in an emergency 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 his own case, under similar
     circumstance (Section 189).
190. Right of person as to acts done for him without his authority: Effect of ratification.—
     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 ratifies them, the same effects will follow as if they had been performed by his authority. ratification = express/ implied

Question 57

valid ratification

Answer 57

The act should be done on behalf of another person who seeks to ratify the same (Sec.196)
2. The principal should be in existence, and competent to contract when the act is done.
3. Ratification may be express or implied. (Sec.197).
4. Ratification should be with full knowledge of the facts. (Sec.198).
5. Ratification should be of the whole transaction(Sec.199).
6. Ratified acts should not be injurious to third person (Sec. 200).
7. Ratification should be made within a reasonable time.

Watson v. Davies

Question 58

Duties of agent

Answer 58

Sec211- Duty to follow principals directions - if no directions then follow general custom prevailing in this line of work

Sec212- duty to show proper skill and care unless principal is fully aware of his lack of skill

sec213- duty to render proper accounts to principle

sec214- duty to communicate with principal and to seek his instructions

sec215, 216- duty not to deal on his own account unless explicitly allowed by principal

217, 218- duty to pay sums recieved for principal (also duty not to make secret profit)

sec190- duty not to sub delegate if the agent undertook to perform personally

Question 59

sub agent

Answer 59

sec190- duty of first agent to not subdelegate tasks he gave personal undertaking for
sub agent allowed in certain conditions and sec192 - when proper sub delegation is done the the sub agent will be equally capable of binding the principal to 3rd parties -sub agent is boudn by all duties of an ordeinary agent and is liable to agent, agent in turn is liable to principle for actions of sub agent

sec193- improper delegation - the agent who appointed sub agent will become liable to 3rd party as if he were principal. will be liable to real principal also.

Question 60

sub agent

Answer 60

sec190- duty of first agent to not subdelegate tasks he gave personal undertaking for
sub agent allowed in certain conditions and sec192 - when proper sub delegation is done the the sub agent will be equally capable of binding the principal to 3rd parties -sub agent is boudn by all duties of an ordeinary agent and is liable to agent, agent in turn is liable to principle for actions of sub agent

sec193- improper delegation - the agent who appointed sub agent will become liable to 3rd party as if he were principal. will be liable to real principal also.

Question 61

rights of agent

Answer 61

sec217, 218- right to retain sum - particular lien allowed
sec222-224 - the principal of 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\
sec225- Right to compensation for damages due to principal’s neglect

Question 62

Duties of principal and liabilty

Answer 62

Duty to Indemnify( Sec 222 and 223)
Duty to compensate agent in case of principal’s neglect ( sec 225)

Sec226 to be liable for the acts of agent if agent acts within authority
sec229- to be liable for agents knowledge and it is presumed that if an agent knows info the principal will recieve notice of the same unless the agent has taken comission of particpated in fraud
237 237. 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.
sec238 Principal’s liability for agent’s fraud, misrepresentation or torts: When there is fraud or misrepresentation by an agent while making an agreement on behalf of the principal (i.e. in the course of the agent’s employment) it not only affects the validity of the contract, but also makes the principal liable, as if that fraud or misrepresentation has been made by the principal; if the agent acts in course of business and within authority (vicarious liability)

Question 63

agents personal liabilty

Answer 63

According to section 230, an agent is presumed to have consented to be personally liable in the
following cases1. Where the contract is made by an agent for the sale or purchase of goods for merchant
resident abroad;
2. Where the agent does not disclose the name of his principal;
3. Where the principal, though disclosed, cannot be sued.
In the three exceptional cases mentioned above, the presumption is that the agent agrees
to undertake personal liability. The personal liability of the agent also arises in certain
other situations, i.e.
4. Where there is contract for the agent’s personal liability.
5. When the agent makes a breach of some legal obligation.
6. When the untruly represents that he has an authority to act on behalf of the principal.
7. when principal is unnamed
8. pretend agent sec235, 236

Question 64

types of principal

Answer 64

Where principal disclosed
Where the existence of the principal is disclosed, Section 226 applies, according to which the
agent’s acts and contracts “will have the same legal consequence as if the contracts had been
entered into and the acts done by the principal in person”.
Unnamed principal
Even where the agent does not disclose the name of his principal, but discloses his representative character, the contract will be the contract of the principal, unless there is
something in its form or signature to show that he intended to be personally liable.
Undisclosed principal4
. He may be sued on it and he has the right to sue the third party and the principal is not liable in such cases. But the principal too has the right to intervene and assert his position as an undisclosed party to the contract. SEC231. Rights of parties to a contract made by agent not disclosed.—If an agent makes a
contract with a person who neither knows, nor has reason to suspect that he is an agent, his
principal may require the performance of the contract; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been principal.

Question 65

Termination of agency

Answer 65

sec201-210

If the agent has exercised his authority partly, the principal may revoke the agency for future
acts only. ( Section 204)
b. If the agency is created for a fixed term and if there is some sufficient cause, the principal may
revoke it before the expiry of the said term. But reasonable compensation must be paid to be
agent ( Section 205)
c. Revocation and renunciation may be expressed or may be implied in the conduct of the
principal or agent respectively. ( Section 207)
d. If the agency is created for a fixed period or continuous, the principal must give a reasonable
notice of revocation of agency to the agent. ( Section 206) The requirement of notice is
mandatory : Popular Shoe Mart v k Srinivasa Rao 199

Termination of Sub-agency and Substituted Agency - S. 210.
The authority of sub-agent will be terminated as and when the main agency is terminated.