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AbstractThe basic notion behind the common Law rules as to agency is expressed in the maxi- Qui per

alium facit per seipsum facere videtur, i.e. He who does an act through another is deemed in
law to do it by himself, or more shortly, qui Facit per alium facit per se, He who acts by
another by another act by himself. Thus it is a valid exception for the notion that one should
not be punished for the acts which they had not committed.
Thus in an agency one person i.e. principal employs another person, i.e. agent to represent him
or to act on his behalf in dealings with a third person. Thus the act of an agent binds the
principal in the same manner in which he would have been bound if he does an act himself.
Section 226 to 238 specifically deals with the section relating to the concept of agents and
principals Liability towards third persons, i.e. third parties.
Thus if an agent is going to deal with third person representing the Principal, in a legal way
there is always a chance that it may go wrong and may invoke some legal consequences for
which at least one is to be sued. In such a case it becomes certainly important to identify the
person to whom the third party to sue. Whether he, i.e. to held agent or that to principal liable
for the breach of the contract. It is held that in most of the cases only principal is held liable for
any breach of contract. Because it is generally understood that the agent is only a middle link
between the Principal and that to the third parties thus according to this view only Principal is
to be held liable for the breach of any contract which was indeed entered upon by the agent in
his authority. But there is only a single exception for the same under which a agent would be
held liable only for the acts done by him in his personal capacity and beyond the authority which
was provided by the contract of agency, between the agent and his Principal.

IntroductionThe term Agency has been described in the Ansons Law of Contract, in the following words:
Although as a general rule one man cannot by contract with another can confer or rights to
impose liabilities upon a third party, yet he may represent another, as being employed by him, for

the purpose of bringing him into legal relation with a third party. And employment for this
purpose is called Agency.1
Whereas, according to Chitty, concept of Agency- The basic notion behind the common Law
rules as to agency is expressed in the maxi- Qui per alium facit per seipsum facere videtur, i.e.
He who does an act through another is deemed in law to do it by himself, or more shortly, qui
Facit per alium facit per se, He who acts by another by another act by himself. The common
law binds and allows one man to authorize another to contract for himself and to bind him an
authorized contract, through it didnt always permit the performance of contracts by an agent,
and the application of agency principles in other parts of law (e.g. torts, evidence) may involve
different considerations from those relevant in contract.2
In the Indian Contract Act, 1872, Section 182 defines as who is an agent and who is a principal
and speaks as followsSection 1823. "Agent" and "principal" defined An "agent" is a person employed to do any act for another, or to represent another in dealing with
third persons. The person for whom such act is done, or who is so represented, is called the
"principal".
Thus in an agency one person i.e. principal employs another person, i.e. agent to represent him or
to act on his behalf in dealings with a third person. Thus the act of an agent binds the principal in
the same manner in which he would have been bound if he does an act himself.
Section 226 to 238 specifically deals with the section relating to the concept of agents and
principals Liability towards third persons, i.e. third parties.

Aim-

1 A.G. Guest, ANTONS LAW OF CONTRACT, 23rd ed. 1971, pp. 543.
2 Chitty, CHITTY ON CONTRACTS,3rd ed. Vol. II, pp. 1.
3 Section 182, INDIAN CONTRACT ACT< 1872.
2

The aim behind this research is to understand the responsibilities of the agent towards the third
parties and how do it effect to the Principal.
Objectives

To understand the concept of the agency.


To find out the responsibilities of the agent towards the third parties under the agency.
To find out the consequence of such act towards the third party and the Principal.

Scope and Limitations


The scope of this research is limited to the Indian Contract Act and the responsibilities of the
agent towards the third persons.
Review of Literature

Avtar Singh, CONTRACT AND SPECIFIC RELIEF, 10 th ed. 2007, Eastern Book
company, Lucknow.

This book deals with the intricacies of the Contract with its specific relief in a straightforward
and lucid style. It contains the recent case laws and developments regarding the concept of
contract and special contract. It also contains the relevant case laws that enhance understanding
on the subject.

Pollock & Sir Dinshaw Fardunji Mulla THE INDIAN CONTRACT ACT, 13th ed.

2007, Lexis Nexis, Gurgaon.


This book is an authority on the Contract of Agency. It deals extensively with the concept of
agency with its essential element and relation with business and relation between principle and
agent. It supports each statutory provision and the authors personal arguments with the help of
case laws. It comprehensively explores the different corners of the above concepts.

Research Questions

What is the concept behind the contact of agency?


What are the responsibilities of agent towards the third persons?
Whether any breach of such responsibility of an agent, creates the liability of the
Principal?
3

Research Methods
The methodology adopted for the purpose of the present research is the doctrinal and the
analytical methods. Both primary and secondary sources have been used for the review of
literature and the collection of data. The primary sources include various statutes, while, the
secondary sources include commentaries, books and articles.
The Primary Sources of data are1. Statutes- a. The Indian Contract Act, 1872.
The Secondary Sources of Date2. Booksa. Avtar Singh, INDIAN CONTRACT AND SPECIFIC RELIEF, 7th ed., 2000, Eastern
Book Company, Lucknow
b. S.S. Srivastava, LAW OF CONTRACTS I & II, 1st ed., 2007, Central Law Publications,
Allahabad
c. S.K. Kapoor, CONTRACT-II, 13th ed., 2007, Central Law Agency, Allahabad
d. S.C. Tripathi, THE INDIAN CONTRACT AND SPECIFIC RELIEF, 2nd ed., 2010,
Central Law Publications, Allahabad
e. Pollock & Sir Dinshaw Fardunji Mulla, THE INDIAN CONTRACT, 7th ed. 2007, Lexis
Nexis, Gurgaon.
f. A.C. Moitra, LAW OF CONTRACT AND SPECIFIC RELIEF, 6th ed. 2012, Universal
Law Publishing Co., New Delhi.
g. Mulla, THE INDIAN CONTRACT ACT, 13th ed. 2011, LexisNexis Butterworths
Wadhwa, Nagpur.

Responsibility of Agent against Third Party and its relationship with the Principal
Starting with Section 226 of the Indian Contract Act, 1872, it speaks as followsSection 2264- Enforcement and Consequences of agent's contracts - Contracts entered into
through an agent, and obligations 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.
Going through meaning, it is pertinent that section specifically provides the specific scenario
under which if an agent who is duly authorized by the Principal to enter into a contract and when
such agent enters into a contract, the principal would be held liable to the contract and the acts
done by the agent in pursuance of such a contract same as he himself has contracted the said
contract or has himself performed such acts.
Thus the agent should have a responsibility against the principal and against the third party or the
customer as may be the case, because it would form into a contract which may not have been
entered directly by the other two parties but would be bound by any such clause present in the
contract. For example- if an agent making a contract on behalf of the principal to sell the plot of
land for which he was duly authorized, at much lower rate than that of the market value, it would
be still stand a good contact against both the buyer of the plot of land, i.e. third party and against
the principal himself.
In cases where the payment is done to the agent of the insurer, i.e. the insurance company, in
such a scenario the insured who has received cover-note of a policy, paid cash towards the
premium of the policy to the authorized agent of the insurance company but the agent issued
cheque under the signature of his own to the company which was later dishonoured, it was held
that even though the customer or the third party has paid the premium to the agent of the
company in his capacity as he was authorized for the same through the insurance company, i.e.
Principal. Thus it was held that the liability of the agent cant be transferred upon the insured.
When the contract is entered into or act is done professionally by agent on behalf of the
principal and is within scope of the actual authority of agent, the principal is liable.5

4 Section 226, THE INDIAN CONTRACT ACT, 1872.


5

Again the same can also be held towards the master-servant relationship, where in the Case of
Parsram v. Jodhpur Ry.,6 it was held thatA servant can bind his master by a contract with a third party only in three cases:
i.
ii.

When he is specially authorized to do so


Ii. When he is entrusted with duties for the due discharge of which authority to make

iii.

such contracts is necessary or useful; and


Where the third persons have reason to believe from his masters conduct that he has
the authority to bind his master.

A servant can bind his principal by an act committed in the course of his service, and for the
masters benefit, even when no express command or privity of the master can be proved, when
the master has put him in such a place to do that class of acts.7
Thus in cases where the master has authorized the servant to do a certain task and in due course
of employment such task if the goes wrong will shift on the liability of principal towards such
third party.
The law of agency as stated in this section is applicable to Negotiable instrument and a pro-note
executed by a person under the authority of a marksman is valid through the marksman has not
affixed his marks to that. An agent is thus not personally liable on a note executed for a disclosed
principal where the money was utilized for the principal.8
Thus this section and Section 227 and 228 describe the effect of the agency on the third parties.
Under this section, when an act is done by an agent within the scope of authority, his acts will be
binding on the principal. Whereas, Section 227 provides for the severance of unauthorized acts
from authorized ones where these are separable. Again, section 228, on the other hand provides

5 Oriental Insurance Co. Ltd. V. Indrapal, Air 2008 (NOC) 1188 (MP) (DB).
6 AIR 1931 Sindh 144.
7 A.C. Moitra, LAW OF CONTRCAT AND SPECIFIC RELIEF, 6th ed. 2012, pp. 1250.
8 Ibid, pp. 1253.
6

that, if the acts are not so separable, they do not bind the principal, but if the acts are separable,
the principal will be bound only to that extent to which he had authorized his agent.9
Moreover, if the contract is entered into or act done professedly on behalf of the principal, and is
within the scope of the actual authority of the agent, there is no difficulty. The motive of the
agent is immaterial in such a case. The principal is bound though the contract may be entered
into and the act done fraudulently in furtherance of the agent's own interests, and contrary to the
interests of the principal, provided the person dealing with the agent in good faith. Where
authority was given to underwrite policies of insurance in the name of the principal according to
the ordinary course of business at Lloyds's, and the agent, in fraud of principal, underwrote
certain guarantee policies, the principal was bound.10

Burden of Proof
The person claiming against the principal must show that the act done was within the scope of
authority, or ostensible authority held or exercised by the agent, and this can be shown by
practice, as well as a written instrument.11 The principal seeking to enforce his rights under a
contract made by a third party with his agent, must be able to show the third party dealt with the
agent as such.12

The other section which deals with the liability of the agent towards third party if done more than
what was authorized to him is specially dealt under section 227 of the Indian Contract Act, 1872,
and provides as follows-

9 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1774-1775.
10 Ibid, pp. 1775; Fazal Ilahi v. East Indian Rly. Co. AIR 1922 All 324.
11 Suga Kuer v. Firm Brijraj Ramniwas, AIR 1937 Pat. 526.
12 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1777.
7

Section 22713- 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.

Agent to Stand Surety for one Standing Surety for Two


When an agent authorized to stand surety for one person stands surety for two persons in
addition, outside the scope of his authority, the unauthorized act of the agent is clearly separable
from his act in standing surety for the person authorized and the principal's liability will be
restricted to that person only under section. 14 Ordinary law of agency does not apply to public
agents and Government is not bound by the unauthorized acts of its officers. Its liability will be
to the extent to which the power given to such officers where an agent having authority to take
delivery only, Railway cannot rebook goods on application of such person. 15 In case of goods
sold if price is paid by the buyer to broker but if the broker fails to show that he was authorized
to receive payment, the payment to broker is not payment to seller.16

Agent Exceeds Authority, but Acts SeparableThe Principal is not bound by the unauthorized acts of his agent, but is bound where the
authority is pursued, or so far as it is distinctly pursued.
An authority given to the consignee to take delivery does not authorize the latter to goods to
another railway station or to rebook them on different conditions, where an agent was authorized
13 Sction 227, THE INDIAN CONTRACT ACT, 1872.
14 Mayani v. Raman Chettyar, AIR 1937 Rang 499.
15 Mohd. Ekram v. Union of India, AIR 1959 Pat 337.
16 Kamal Singh Dugar v. Corporated Engineers (India) Pv. Ltd., AIR 1963 Cal 464.
8

to stand surety for A, but the agent stood guarantee for B the act being separable from the
unauthorized one, the principal's liability was restricted to the suretyship of A. 17 Where the agent
borrowed money without authority but used it partly towards discharging the principal's debt to
third parties, the principal was bound only to the extent of the discharged debts. Where the agent
authorized to sell one half of the immoveable property executed an agreement to sell the entire
property it was held that the portion which he was authorized to sell being severable, the
agreement was binding on the principal to the extent of the portion authorized for sale.18
Thus though this section doesnt directly deal with the relationship between principal and the
third party, but it can be construed that in a situation when there is no expressed authority to
perform an act by the principal than the third party would certainly not be allowed to file a suit
against the principal. This the act of an agent that to which is out of his authority would certainly
hamper the third party and to that extent the agent should have be explicitly liable under this
section if done in malafide intention.

Whereas Section 228 of the Indian Contract Act deals with the power of the principal where if
any contract is done by his agent as such that some parts of act was under the authority of the
principal and some arent, then in this situation the principal has the power to either recognize
such an act under his agency or completely ignore it. Thus the Section 228 speaks as follows-

Section 22819- 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.
Agent's Acts in Excess of Authority
17 Mayandi Ekram v. Union of India, AIR 1959 Pat 337.
18 Ahammed v. Mammad Kunhi, AIR 1987 Ker 228.
19 Section 228, THE INDIAN CONTRACT ACT, 1872.
9

A principal should not be bound by an unauthorized act done by his agent though he derived
benefit therefrom, and when the agent did not disclose the name of the principal there can be no
claim against the principal.20 Similarly, the principal is not bound by the act of his agent in excess
of his authority. When an agent contracts for delivery of goods contrary to the instruction of the
principal as regards the time of delivery, the principal would not be bound by the agent's contract
as he exceeds the authority. A custom allowing a broker to deviate from the instruction of the
principal cannot be enforced? Where a bank makes a payment on a forged cheque, he cannot
make the customer liable except on the d of negligence imputable to the customer. So also would
be the case where authorized to draw bills up to a certain amount, draws bills for a larger
amount. So where a imoktearnama gives authority to borrow, the mooktear has no authority to
bind the principal by a statement of account.
An agent entering into compromise of doubtful rights with regard to certain property of his
principal a major portion of which was found not under dispute as principal's title has no
authority to enter into compromise and the whole compromise fails. 21 An agent authorized to act
in reference to the principal's land and the charges thereon cannot bind him by acknowledging a
personal debt. Where an agent acting in collusion with a third party does an act the consent of his
principal, and the act is detrimental to the interests of the principal, the latter is not bound by the
act.
If the agent has obtained money or property by doing an act beyond the scope of his authority the
principal not would not be liable for the money or property or proceeds from them unless he has
received benefit from it; in the latter case, he becomes liable to the extent of the benefit received
by him; else the principal is entitled, as against the agent and third parties subject to any
enactment to the contrary, to recover the property whosesoever it may be found.
But the may only in certain cases be held liable in excess of the agents authority if the principal
by his words or conduct, induced a third person to believe that the acts of his agent were within
his scope of the authority.
20 Jagmohanprasad v. Firm of Sampat, AIR 1959 Nag 27.
21 Uttar Pradesh Government v. Church Missionery Trust Association Ltd. London and Allahabad, AIR
1948 Oudh 54.
10

Whereas Section 229, of the Act provides the responsibilities upon the agent to serve any notice
which has been served on him to be provided to the principal and even if didnt provide such a
notice to the principal, the principal will also be liable as he would have known about the notice.
Section 22922- Consequences of notice given to agent 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 consequence as if it had been given to or obtained by the
principal.
An agent fully represents his principal in dealing with other persons, and knowledge acquired by
him while acting within the scope of his agency must be held to be the knowledge of his
principal.23
It is not a mere question of constructive notice or inference of fact, but a rule of law which
imputes the knowledge of the agent to the principal, or, in other words, the agency extends to
receiving notice on behalf of his principal, or, in other words, the agency extends to receiving
notice on behalf of his principal of whatever is material to be stated in the course of the
proceedings.
For this rule to operate:
(i) the agent must be under a duty to communicate;
(ii) the information must be material;
(iii) it must have been obtained in the course of business for which the agent has been
engaged; and
(iv) the agent is not privy to a fraud on the principal.24

22 Section 229, THE INDIAN CONTRACT ACT, 1872.


23 Simanchal Mahapatro v. Budhiram Padhi, AIR 1976 Ori 113.
11

But a notice given to the agent after completion of his authority would not constitute a notice to
the Principal.
But if such a notice is given to the agent in due course of business and relating to the material
facts with the authority of the agency, the principal is bound by such a material fact.
In Course of the Business
It is important that the knowledge of the agent must have been gained in course of the business
transacted by him for the principal, and the knowledge the agent prior to his employment does
not, therefore, operate as a notice to the principal.25 Section 229 of the Indian Contract Act
provides that any notice given 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.
According to the provisions of section 229 of the Contract Act, notice to be received by the agent
must be in course of the business transacted by him for the principal. If, therefore, receiving such
a notice is not within his authority and if the agent's lack of authority in this regard is known to
the defendant, then certainly the defendant cannot rely upon service of the notice on such an
agent as service on the principal.
When the notice can be imputedBut constructive notice of a fact which the agent knew cannot be imputed to the principal when it
was not to the interest of the agent to disclose the fact to the and the agent did not in fact
disclose. Thus where the notice involves the confession by an attorney of a fraud practiced by
himself, it will have presumed to have been given to his client. Where the agent, though acting
on principals behalf in some transaction in which his knowledge would be imputed to his
principal, takes part in any fraud or misfeasance, the principal is not bound by the agent's
knowledge of such or misfeasance. Where manager and accountant of a company clouding in
24 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1781.
25 Gunabai v. Motilal, AIR 1925 Nag. 398.
12

execution of a rent note and practice of fraud has been played on the agent's knowledge is no
knowledge of company under section 229.
Section 231-Responsibility of an agent to disclose the principal to the third party but in contrary
to that if it is not mentioned the third party may have held liable the principal in the same way as
he would have done the agent if he was to be an agent and the second clause of this Section 231
provides that in such a case the third party can also decline to perform his part of the contract and
thus it is provided in the following SectionSection 23126- 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 the principal.
If the principal discloses himself before the contract is completed, the other contracting party
may refuse to fulfil the contract, if he can show that, if he had known who was the principal in
the contract, or if he had known that the agent was not a principal, he would not have entered
into the contract.
Section 231 deals with the rights: (a) of the principal; and (b) of the third party in cases when the
contract entered into by the agent without disclosing the principal and the third contracts with an
agent not knowing or having reasonable ground to suspect that he is only an agent. In such a
case, the principal can demand performance of the contract; in case, the third party can claim
against the principal the same rights he had as against the agent as if he had been the principal.
Further, if the principal discloses before the contract is completed, the third party can refuse to
fulfill the contract if he can show that he has refused to make the contract if he had known:
(i) who is the principal; or
(ii) that the agent was not the principal.27
26 Section 231, THE INDIAN CONTRACT ACT, 1872.
27 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1801.
13

First clause: Rights and Liabilities of the Undisclosed Principal


The first paragraph deals with the general rule that the principal can enforce the entered into by
his agent with a third party even though the agent had not disclosed name of the principal; and he
can do so even when the third person neither knows, nor has reason to suspect that the person
with whom he entered into a contract was an agent, The principal has the right to sue or be sued
on a contract made in the name of another person authority because the contract is in truth,
although not in form, that of the undisclosed principal himself.
Where the agent did not disclose the name of his principal at the time of making contract, the
principal is neither a necessary nor property party to the suit for breach contract.28

Second Clause: Disclosure by Principal


The second paragraph of Sec. 231 is really a branch of general rule that agreements personal
considerations of skill, confidence, or the like are not assignable or transferable.
The expression 'if the principal discloses himself before the contract is completed' in the
paragraph must be read in the context of the first, i.e., where the agent made the contract with a
person who did not know, nor had reason to suspect that he was an agent right of the third party
to repudiate the contract under the second paragraph arises only where the principal himself
makes the disclosure, and that it does not arise where the is made by some other person or the
information reaches him from some other source.
When the third party comes to about both the agent and the principal he may sue either the agent
or the principal or both.
Rights of the Third PartyWhere the undisclosed principal seeks performance, he cannot exercise his right to prejudice of
the third party who has dealt with the agent. The person who deals with such an agent shall be
put in the same position as if he had been dealing with the real principal and consequently he will
have the same rights of set off, which he would have had the agent.
28 Nagnath Kaulwar and sons v. Govindram Shyamsunder, AIR 2004 Bom 271.
14

Section 232. Performance of contract with agent supposed to be principal29Where one man 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.
Thus here the agent should have the responsibilities, because if he contracts a deals with the third
party, provided that the third party doesnt have the knowledge of he being merely an agent, thus
when the real principal knows about the contract he can obtain such a performance of the
contract as he has a right for the same.
Thus accordingly the agent should have a responsibility against the third person to let him know
about his position as a mere agent and he should have provided the name of the actual principal
with whom the actual agreement is contracted, because even if the agent doesnt let the third
party to know about the principal, the principal has a right to sue the third party to perform his
part of the contract.
Right of a third party if undisclosed principal sues- Sections 231 and Section 232 refers to
such a condition where an undisclosed principal sues the third party. But under this section the
third party cannot set off any claim which has been claimed, even under these sections the third
party cannot sue the agent personally30, nor he can rely upon the payment made to the agent
personally.31

Right of third person dealing with the agent personally liableSection 23332-Right of person dealing with agent personally liable -

29 Section 232, THE INDIAN CONTRACT ACT, 1872.


30 Montagu v. Forwood, (1893) 2 QB 350.
31 Mulla, THE INDIAN CONTRACT ACT, 13TH ed. 2011, pp. 352.
15

In cases where the agent is personally liable, a person dealing with him may hold either him or
his principal, or both of them, liable.
This provides the right on the third party, only when the agent is personally liable, the third party
contracting with may seek his remedies against him may seek his remedies against him or
against his principal or against both of them.
This section also empowers third party to hold both the agent and the principal liable for any
breach of contract on the part of the agent for personal liability as it is provided under section
230.
However, it is also being seen that this section cant be construed as the meaning only that the
plaintiff might sue both principal and agent in the alternative, but he cannot get judgement
against both of them jointly for the amount sued for.33
This right exit only when the when the third person was aware when he made the contract that
the person with whom he was dealing was an agent.34
Section 23435-Consequence of Inducing agent or principal to act on belief that
principal or agent will be held exclusively liable When a person who has made a contract with an agent induces the agent to act upon the belief
that' the Principal only will be held liable, or induces the principal to act upon the belief that the
agent only will be held liable, he cannot afterwards hold liable the agent or principal
respectively.
It is very important to understand the right of the third party contracting with the principle
through the agent, and if in due course the third party explicitly provides that either only agent or
only principal will be liable in breach of such contract than the third party cant sue other party in
32 Section 233, THE INDIAN CONTRACT ACT, 1872.
33 Lachhman Das v. Bhagirath, AIR 1926 Oudh 41.
34 Re Ganges Steam Tug Co. Ltd., ex. P. Delhi and London Bank Ltd., (1890) ILR 18 Cal 31.
35 Section 234, THE INDIAN CONTRACT ACT, 1872.
16

such a kind of contract. Thus it gives the third party certain rights as he can at the time of
forming the contract, he can express his view that on any kind of breach he will sue only any one
of them but bot both of them. And again some restrictions as the third party cannot sue the other
party even he is solely liable for such breach.

The most important Section which deals with the responsibility of an agent is under section 235,
of Indian Contract Act, 1872.
Section 23536-Liability of pretended agent A person untruly representing himself to be the authorized agent of another, and thereby inducing
a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his
acts, to make compensation to the other in respect of any loss or damage which he has incurred
by so dealing.
Where an agent not being an authorized agent, represents himself to a third party to be an agent
of another, and that other doe not ratify his act, the purport agent must compensate the third party
for any loss or damage incurred by so dealing. 37 Where any person purports to do any kind of
particular act or make a contract on the notion that he is an agent of some particular principal,
which in reality he is not. Thus in actual sense he has no authority by the principal to do an act
and the agent has formed the contract on his personal authority. Thus in these kind of situations
the agent is liable to be sued and for breach of duty, and due to lack of such authority the third
party was not able to sue principal. Thus agent is to held liable to be sued for such
misappropriation.
The conditions for application of the section are:
(i) the agent has made an untrue representation that he is an authorized agent of another
(which may also be a representation as to the extent of authority of the agent);
36 Section 235, THE INDIAN CONTRACT ACT, 1872.
37 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1810.
17

(ii) the representation relates to fact;


(iii) the third party has been misled or induced to deal with the agent on the faith of
such a representation;
(iv) the principal has repudiated or refused to ratify the transaction;
(v) the third party has suffered a loss in consequence.38
Although this section doesnt provide about the liability of the principal but where the
transaction entered into by the pretended agent.39

The last section of the Indian Contract Act, 1872, provides the Sections which speaks as followsSection 26840- Effect, on agreement, of misrepresentation or fraud by agent Misrepresentations 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.
Strictly speaking as the duties and obligations of the agents towards are limited and as followsPersonal liability of agent, to repay money received to Principals useIf money is paid to an agent on the principals behalf and the payer on such becomes entitled as
against the principal, to repayment, the agent as a general rule is not liable to repay it even
though the money is still in his possession.

38 Pollock & Mulla, THE INDIAN CONTRACT AND SPECIFIC RELIEF ACTS, 14th ed. 2013, pp.
1810.
39 Kasam v. Narayan, AIR 1930 nag 42.
40 Section 238, THE INDIAN CONTRACT ACT, 1872.
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But he will be personally liable to repay the money paid to him that too under mistake of fact. 41
Unless he has transfer the sum to the principal in good faith.
Similar principles apply where the money is paid in respect of voidable transactions, or
consideration which totally fails or under duress or in consequence of any wrong or fraud to
which the agent is not a party.
Any agent including a public agent who commits a wrongful act in the course of the employment
is personally liable to any third person who suffered loss or damage thereby notwithstanding any
fact that the act was expressly authorized or to ratified by the principal unless it was thereby
deprived of this wrongful character it is immaterial that the agent did it innocently and without
the knowledge that it was wrongful, except in cases where the actual malice is essential to
constitute the wrong.42
But in cases where the agent does anything and gains by fraud in the authority if the agency the
principal would still be held liable for such an act.

ConclusionSince the Contract of Agency, is a Special kind of Contract, whereby a person employs another
person to either represent him in dealings with any third person. The person so employed is
known as agent and the person who employs is the Principal, as provided under section 182 of
the Indian Contract Act.
The basic notion behind the common Law rules as to agency is expressed in the maxi- Qui per
alium facit per seipsum facere videtur, i.e. He who does an act through another is deemed in law
to do it by himself, or more shortly, qui Facit per alium facit per se, He who acts by another by
another act by himself. The common law binds and allows one man to authorize another to
contract for himself and to bind him an authorized contract, through it didnt always permit the
performance of contracts by an agent, and the application of agency principles in other parts of
law (e.g. torts, evidence) may involve different considerations from those relevant in contract.
41 Newall v. Toulinson, (1871) LR 6CP 405.
42 A.C. Moitra, LAW OF CONTRCAT AND SPECIFIC RELIEF, 6th ed. 2012, pp. 1288.
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Thus in an agency one person i.e. principal employs another person, i.e. agent to represent him or
to act on his behalf in dealings with a third person. Thus the act of an agent binds the principal in
the same manner in which he would have been bound if he does an act himself.
Thus if an agent is going to deal with third person representing the Principal, in a legal way there
is always a chance that it may go wrong and may invoke some legal consequences for which at
least one is to be sued. In such a case it becomes certainly important to identify the person to
whom the third party to sue. Whether he, i.e. to held agent or that to principal liable for the
breach of the contract. It is held that in most of the cases only principal is held liable for any
breach of contract. Because it is generally understood that the agent is only a middle link
between the Principal and that to the third parties thus according to this view only Principal is to
be held liable for the breach of any contract which was indeed entered upon by the agent in his
authority. But there is only a single exception for the same under which a agent would be held
liable only for the acts done by him in his personal capacity and beyond the authority which was
provided by the contract of agency, between the agent and his Principal.

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