ICA

Agency
(Part )
Lecture-17

SHIVANI SOLANKI
TOPICS
1 Pledge

2 Agency
 CHAPTER IX
Bailments of pledges sec 172-181
 Contract of Pledge

Bailment of Goods by

ONE PARTY As SECURITY for OTHER PARTY

PAWNOR PAWNEE
(Bailor) (Bailee)

1. Payment of debt or
2. Performance of promise
 Sec 177. Defaulting pawner’s right to redeem.—

If a time is stipulated for the payment of the debt, or

performance of the promise, for which the pledge is made, and
the pawnor makes default in payment of the debt or
performance of the promise at the stipulated time, he may
redeem the goods pledged at any subsequent time before the
actual sale of them ; but he must, in that case, pay, in addition,
any expenses which have arisen from his default.
 Status of Pledge

178 178A 179

Pledge by mercantile
Pledge by person in Pledge where
agent in possession of
TITLE possession under pawnor has only a
goods or the document of
voidable contract limited interest.
title to goods

VALID
as if he were expressly VALID
PLEDGE is authorised by the owner pawnee acquires a to the extent of
of the goods to make the good title to the that interest.
same goods
Pawnee acts in good faith Pawnee acts in
and has not at the time of good faith and
PROVIDED the pledge notice that the without notice of
pawnor has not authority the pawnor’s
to pledge. defect of title.
 Sec 178. Pledge by mercantile agent.—

Where a mercantile agent is, with the consent of the owner, in

possession of goods or the document 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 authorised by the owner of the goods to make the
same; provided that the pawnee acts in good faith and has not
at the time of the pledge notice that the pawnor has not
authority to pledge.

Explanation.—In this section, the expressions “mercantile

agent” and “documents of title” shall have the meanings
assigned to them in the Indian Sale of Goods Act, 1930 (3 of
1930).
 Sec 178A. Pledge by person in possession under voidable contract.—

When the pawnor has obtained possession of the goods

pledged by him under a contract voidable under section 19 or
section 19A, but the contract has not been rescinded at the
time of the pledge, the pawnee acquires a good title to the
goods, provided he acts in good faith and without notice of the
pawnor’s defect of title.
 Sec 179. Pledge where pawnor has only a limited interest.—

Where a person pledges goods in which he has only a limited

interest, the pledge is valid to the extent of that interest.
 Suits by bailees or bailors against wrong-doers

Sec 180 Sec 181

Suit by bailor or bailee Apportionment of relief or

against wrong-doer compensation obtained by such suit

If a third person between the bailor and the

1. wrongfully deprives the bailee,
bailee of the use or be dealt with according to their
2. possession of the goods
respective interests.
bailed, or
3. does them any injury
 Sec 180.Suit by bailor or bailee against wrong-doer.—

If a third person wrongfully deprives the bailee of the use or

possession of the goods bailed, or does them any injury, the
bailee is entitled to use such remedies as the owner might
have used in the like case if no bailment had been made; and
either the bailor or the bailee may bring a suit against a third
person for such deprivation or injury.
 Sec 181. Apportionment of relief or compensation obtained by such suits.—

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.
 PLEDGE

Lallan Prasad v. Rahmat Ali and Anr., 1996

The plaintiff advanced INR 20,000 to the defendant against a promissory
note and a receipt. An agreement was signed by both the parties where the
defendant agreed to pledge his aeroscapes as collateral against his debt. As
per their agreement, the defendant had to deliver the aeroscapes to the
appellant and the goods would remain in his custody.
The plaintiff filed a lawsuit claiming that the above-mentioned goods were
never delivered to be in his custody and therefore, this agreement cannot
be considered as a contract of pledge. He claimed that he was entitled to
recover the amount loaned by him.
The judgement was in the favour of the defendant. It was held by the
Supreme Court that the pledged goods were delivered to the plaintiff. This
meant that this agreement did ripen into a contract of pledge. The Court
also stated that the plaintiff was not entitled to any compensation on his
stance that the goods were never pledged to him.
 PLEDGE

The Morvi Mercantile Bank Ltd. And Anr. v. Union of India, 1965
A firm operating in Mumbai entrusted their goods worth INR 35,500 to
Railways for its delivery to Delhi. The firm got their receipt for these goods
from the Railways. In order to get an advance of INR 20,000 from the
plaintiff, the firm pledged these receipts as collateral for the same.
The goods were lost by the railways and they offered to compensate with
certain parcels to the plaintiff. The plaintiff rejected this and claimed that
those weren’t the goods that were pledged to them. The plaintiff, hence,
sued the railways to recover INR 35,500 against the value of goods pledged
to them including the damages.
The Supreme Court of India ruled in favour of the plaintiff. It was held that
railway receipts can be valid as goods under a contract of pledge. It was also
held that the plaintiff was the pawnee of the goods and not merely its
documents of title. It was stated that since the pawnee in a contract of
pledge has the authority as the owner of the goods, the plaintiff will be
allowed to sue for the entire value of the goods and not just the amount he
has advanced.
 Feature Bailment (148) Pledge (172)
Bailment refers to the
Pledge is the transfer of
transfer of possession of a
Definition possession of a good as security
good from the bailor to the
for a debt or obligation.
bailee.
Three parties are involved: the
Parties Two parties are involved:
pledgor, the pledgee, and the
Involved the bailor and the bailee.
debtor.
The purpose is usually for
The purpose is to secure a debt
Purpose the safekeeping, repair, or
or obligation.
use of the good.
The good is returned after
Return of The good is returned after the
the agreed purpose is
Good debt is repaid.
fulfilled.
The bailee cannot use the The pledgee has the right to sell
Rights of the
good for any purpose other the good if the debt is not
Possessor
than the agreed one. repaid.
 CHAPTER X
AGENCY Sec 182-238
Appointment and authority of
agents

Sec 182-189
 AGENCY

DELIVERY of Goods by

ONE PARTY Employs OTHER PARTY

PRINCIPAL AGENT
To represent him or
work on his behalf, as in
dealings with the third
person.
 AGENCY (Sec 182-238)

Sec 182:- Definition- Agent and principal

An “AGENT” is a person
1. employed to do any act for another, or
2. to represent another in dealings with third persons.
The person for whom such act is done, or who is so represented, is called the “PRINCIPAL”.

183. Who may employ agent 184. Who may be an agent

age of majority 1. b/w:- 3rd Person- Pr

who is of sound mind any person may become an agent,
2. 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

185. Consideration not necessary.—No consideration is necessary to create an agency.

 Sec 182.“Agent” and “principal” defined.—

An “agent” is a person employed to do any act for another, or

to represent another in dealings with third persons.

The person for whom such act is done, or who is so

represented, is called the “principal”.
 Who may be “Agent” and “principal”

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.

184. Who may be an agent.—As between the principal and

third persons, 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.

185. Consideration not necessary.—No consideration is

necessary to create an agency
 Who may be “Agent” and “principal”

Shephard v Cartwright
It was held that a minor is incapable of selecting an agent for
himself/herself to act on his/her behalf because if the law
allows such a situation to occur, the selection of the said agent
will be void. It will follow that every act that the agent so
selected will be void ab initio and incompetent of being ratified
by the Principle.

Loon Karan Sohanlal v. John & Co.

It was held that while examining the evidence, must try to find
out the true nature of the relationship and the functions and
powers assigned to the so-called agent.
 Who may be “Agent” and “principal”

Harris v Morris
If the husband has expressly informed traders not to supply
any goods on credit to his wife, then it is unlikely that the
husband will be liable for the debts incurred by the wife as his
agent.
 Extend of Agent’s Authority

186. Agent’s authority 187:- IMPLIED or EXPRESS

may be expressed or AUTHORITY
implied.

Sec 188:- General Sec 189:- Authority in

Authority Emergency

1. To do all lawful things 1. Do all act to protect

2. Things usually done in principal from loss as
course of business person of ordinary
prudence would do.
 Sec 186. Agent’s authority may be expressed or implied.—

The authority of an agent may be expressed or implied

 Sec 187. Definitions of express and implied authority.—

An authority is said to be express when it is given by words

spoken or written. An authority is said to be implied when it is
to be inferred from the circumstances of the case; and things
spoken or written, or the ordinary course of dealing, may be
accounted circumstances of the case.

Illustration
A owns a shop in Serampore, living himself in Calcutta, and
visiting the shop occasionally. The shop is managed by B, and
he is in the habit of ordering goods from C in the name of A for
the purposes of the shop, and of paying for them out of A’s
funds with A’s knowledge. B has an implied authority from A to
order goods from C in the name of A for the purposes of the
shop
 Sec 188. Extent of agent’s authority.—

An agent, having an authority to do an act, has authority to do

every lawful thing which is necessary in order to do such act.
An agent having an authority to carry on a business, has
authority to do every lawful thing necessary for the purpose,
or usually done in the course, of conducting such business.
 Sec 188. Extent of agent’s authority.—

Illustrations

(a) A is employed by B, residing in London, to recover at

Bombay a debt due to B. A may adopt any legal process
necessary for the purpose of recovering the debt, and may
give a valid discharge for the same.

(b) A constitutes B his agent to carry on his business of a ship-

builder. B may purchase timber and other materials, and
hire workmen, for the purpose of carrying on the business
 Sec 189.Agent’s authority in an emergency.—

An agent has 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 circumstances.

Illustrations
(a) An agent for sale may have goods repaired if it be
necessary.

(b) A consigns provisions to B at Calcutta, with directions to

send them immediately to C, at Cuttack. B may sell the
provisions at Calcutta, if they will not bear the journey to
Cuttack without spoiling.
Sub-agents

Sec 190-195
 Sub Agent & Substituted Agent

Sub Agent (Sec 190-193) Substituted Agent (Sec 194-195)

Sec 190 :- When agent cannot delegate
1. unless by the ordinary custom of trade
2. from the nature of the agency
Sec 194:-
Sec 195. Agent’s
Relation between
duty in naming
principal and
such person:-
person duly
Sec 192. Sec 193:- Agent’s appointed by exercise
Representation responsibility for agent to act in discretion as a
Sec 191. of principal by sub-agent business of agency man of ordinary
Sub-agent sub-agent appointed prudence
defined properly without Such person is not
appointed:- Pr authority:-Ag Sub-agent, rather
resp. to 3rd Bound & resp. to an agent of Pr
person Pr. & 3rd person
 Sec 190. When agent cannot delegate.—

An agent cannot lawfully employ another to perform acts

which he has expressly or impliedly undertaken to perform
personally, unless by the ordinary custom of trade a sub-agent
may, or, from the nature of the agency, a sub-agent must, be
employed.
 Sec 191. “Sub-agent” defined.—

A “sub-agent” is a person employed by, and acting under the

control of, the original agent in the business of the agency.
 Sec 192. Representation of principal by sub-agent properly appointed.—

Where a sub-agent is properly appointed, the principal is, so

far as regards third persons, represented by the sub-agent, and
is bound by and responsible for his acts, as if he were an agent
originally appointed by the principal.

Agent’s responsibility for sub-agent.—The agent is responsible

to the principal for the acts of the sub-agent.

Sub-agent’s responsibility.—The sub-agent is responsible for

his acts to the agent, but not tothe principal, except in cases of
fraud or wilful wrong.
 Sec 193. Agent’s responsibility for sub-agent appointed without authority.—

Where an agent, without having authority to do so, has

appointed a person to act as a sub-agent, the agent stands
towards such person in the relation of a principal to an agent,
and is responsible for his acts both to the principal and to third
persons; the principal is not represented, by or responsible for
the acts of the person so employed, nor is that person
responsible to the principal.
 Sec 194.Relation between principal and person duly appointed by agent to act in
business of agency.—

Where an agent, holding an express or implied authority to name

another person to act for the principal in the business of the agency,
has named another person accordingly, such person is not a sub-
agent, but an agent of the principal for such part of the business of
the agency as is entrusted to him.

Illustrations
(a)A directs B, his solicitor, to sell his estate by auction, and to
employ an auctioneer for the purpose. B names C, an auctioneer, to
conduct the sale. C is not a sub-agent, but is A’s agent for the
conduct of the sale.

(b)A authorizes B, a merchant in Calcutta, to recover the moneys due

to A from C & Co. B instructs D, a solicitor, to take legal proceedings
against C & Co. for the recovery of the money. D is not a sub-agent,
but is solicitor for A.
 Sec 195. Agent’s duty in naming such person.—

In selecting such agent for his principal, an agent is bound to

exercise the same amount of discretion as a man of ordinary
prudence would exercise in his own case; and, if he does this,
he is not responsible to the principal for the acts or negligence
of the agent so selected.
 Sec 195. Agent’s duty in naming such person.—

Illustrations

(a)A instructs B, a merchant, to buy a ship for him. B employs a

ship-surveyor of good reputation to choose a ship for A. The
surveyor makes the choice negligently and the ship turns out
to be unseaworthy and is lost. B is not, but the surveyor is,
responsible to A.

(b)A consigns goods to B, a merchant, for sale. B, in due course,

employs an auctioneer in good credit to sell the goods of A,
and allows the auctioneer to receive the proceeds of the sale.
The auctioneer afterwards becomes insolvent without having
accounted for the proceeds. B is not responsible to A for the
proceeds.
 Differences Sub-Agent Substituted Agent
Control &
Controlled by original agent Controlled by principal directly
Direction

Responsibility Responsible to original agent Responsible directly to principal

Privity of
Privity with original agent Privity with principal
Contract
Appointed by original agent Appointed by original agent with
Appointment based on business needs or explicit or implied authority from
trade customs principal
Liable to original agent for
Liability Controlled by the original agent
acts or misconduct
Liable to the principal for acts or
Remuneration Paid by original agent
breaches
Responsibility
No direct contractual Direct contractual relationship with
towards Third
relationship with principal principal
Parties
Ratification

Sec 196-200
 RATIFICATION

Sec 196 Sec 197 Sec 198 Sec 199 Sec 200

Right of Effect of Ratification

person as to Ratification Knowledge ratifying of
acts done may be requisite for unauthorized unauthorized
for him expressed or valid act forming act cannot
without his implied ratification part of a injure third
authority transaction person
 Sec 196. 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 ratify them, the same effects will follow
as if they had been performed by his authority.
 Sec 197.Ratification may be expressed or implied.—

Ratification may be expressed or may be implied in the

conduct of the person on whose behalf the acts are done.

Illustrations

(a)A, without authority, buys goods for B. Afterwards B sells

them to C on his own account; B’s conduct implies a ratification
of the purchase made for him by A.

(b)A, without B’s authority, lends B’s money to C. Afterwards B

accepts interest on the money from C. B’s conduct implies a
ratification of the loan
 Sec 198.Knowledge requisite for valid ratification.—

No valid ratification can be made by a person whose

knowledge of the facts of the case is materially defective
 Sec 199.Effect of ratifying unauthorized act forming part of a transaction.—

A person ratifying any unauthorized act done on his behalf

ratifies the whole of the transaction of which such act formed a
part.
 Sec 200.Ratification of unauthorized act cannot injure third person.—

An act done by one person on behalf of another, without such other

person’s authority, which, if done with authority, would have the
effect of subjecting a third person to damages, or of terminating any
right or interest of a third person, cannot, by ratification, be made to
have such effect.

Illustrations
(a)A, not being authorized thereto by B, demands, on behalf of B, the
delivery of a chattel, the property of B, from C, who is in possession
of it. This demand cannot be ratified by B, so as to make C liable for
damages for his refusal to deliver.

(b)A holds a lease from B, terminable on three months’ notice. C, an

unauthorized person, gives notice of termination to A. The notice
cannot be ratified by B, so as to be binding on A.
 Sec 200.Ratification of unauthorized act cannot injure third person.—

Bolton Partner v. Lambert

T offered to sell land to the managing director of a company,
who accepted without authority on behalf of the firm. T
rescinded the offer and informed the employer of the
situation. The unauthorized acceptance of the managing
director was subsequently ratified by the company. It was
determined that the contract is valid. T's retraction of the offer
was useless because P ratified on time. The agent is also placed
in the same position as if he had authority to perform the act
at the time it was performed.
Revocation of Authority

Sec 201-210
 Sec 201 Termination of Agency – (Sec 201-210)

By Principal By Agent When Principal or When

Agent principal

Revoking his 1. Renouncing 1. Dies or Is adjudicated

authority business of 2. Becomes insolvent by
agency unsoundmind court
2. By
completing
business of
agency
 Sec 201. Termination of agency.—

An agency is terminated by the principal revoking his authority;

or by the agent renouncing the business of the agency; or by
the business of the agency being completed; or by either the
principal or agent dying or becoming of unsound mind; or by
the principal being adjudicated an insolvent under the
provisions of any Act for the time being in force for the relief of
insolvent debtors
 Sec 202.Termination of agency, where agent has an interest in subject-matter.—

Where the agent has himself an interest in the property which

forms the subject-matter of the agency, the agency cannot, in the
absence of an express contract, be terminated to the prejudice of
such interest.

Illustrations
(a) A gives authority to B to sell A’s land, and to pay himself, out
of the proceeds, the debts due to him from A. A cannot
revoke this authority, nor can it be terminated by his insanity
or death.
(b) A consigns 1,000 bales of cotton to B, who has made advances
to him on such cotton, and desires B to sell the cotton, and to
repay himself out of the price, the amount of his own
advances. A cannot revoke this authority, nor is it terminated
by his insanity or death
 Sec 203.When principal may revoke agent’s 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 exercised so as to bind
the principal.
 Sec 204.Revocation where authority has been partly exercised.—

The principal cannot revoke the authority given to his agent after the
authority has been partly exercised, so far as regards such acts and
obligations as arise from acts already done in the agency.

Illustrations
(a)A authorizes B to buy 1,000 bales of cotton on account of A, and
to pay for it out of A’s moneys remaining in B’s hands. B buys 1,000
bales of cotton in his own name, so as to make himself personally
liable for the price. A cannot revoke B’s authority so far as regards
payment for the cotton.

(b) A authorizes B to buy 1,000 bales of cotton on account of A, and

to pay for it out of A’s moneys remaining in B’s hands. B buys 1,000
bales of cotton in A’s name, and so as not to render himself
personally liable for the price. A can revoke B’s authority to pay for
the cotton.
 Sec 205.Compensation for revocation by principal, or renunciation by agent.—

Where there is an express or implied contract that the agency

should be continued for any period of time, the principal must
make compensation to the agent, or the agent to the principal,
as the case may be, for any previous revocation or renunciation
of the agency without sufficient cause.
 Sec 206. Notice of revocation or renunciation.—

Reasonable notice must be given of such revocation or

renunciation, otherwise the damage thereby resulting to the
principal or the agent, as the case may be, must be made good
to the one by the other.
 Sec 207.Revocation and renunciation may be expressed or implied.—

Revocation and renunciation may be expressed or may be

implied in the conduct of the principal or agent respectively.

Illustration
A empowers B to let A’s house. Afterwards A lets it himself.
This is an implied revocation of B’s authority
 Sec 208.When termination of agent’s authority takes effect as to agent, and as
to third persons.—

The termination of the authority of an agent does not, so far as

regards the agent, take effect before it becomes known to him,
or, so far as regards third persons, before it becomes known to
them.

Illustrations

(a) A directs B to sell goods for him, and agrees to give B five
per cent. commission on the price fetched by the goods. A
afterwards, by letter, revoke B’s authority. B, after the letter is
sent, but before he receives it, sells the goods for 100 rupees.
The sale is binding on A, and B is entitled to five rupees as his
commission
 Sec 208.When termination of agent’s authority takes effect as to agent, and as
to third persons.—

Illustrations

(b) A, at Madras, by letter, directs B to sell for him some cotton

lying in a warehouse in Bombay, and afterwards, by letter,
revokes his authority to sell, and directs B to send the cotton to
Madras. B, after receiving the second letter, enters into a
contract with C, who knows of the first letter, but not of the
second, for the sale to him of the cotton. C pays B the money,
with which B absconds. C’s payment is good as against A.

(c) A directs B, his agent, to pay certain money to C. A dies, and

D takes out probate to his will. B, after A’s death, but before
hearing of it, pays the money to C. The payment is good as
against D, the executor
 Sec 209.Agent’s duty on termination of agency by principal’s death or
insanity.—

When an agency is terminated by the principal dying or

becoming of unsound mind, the agent is bound to take, on
behalf of the representatives of his late principal, all
reasonable steps for the protection and preservation of the
interests entrusted to him.
 Sec 210. Termination of sub-agent’s authority.—

The termination of the authority of an agent causes the

termination (subject to the rules herein contained regarding
the termination of an agent’s authority) of the authority of all
sub-agents appointed by him.
 Sec 238. Effect, on agreement, of misrepresentation of fraud, by agent.—

Misrepresentation made, or frauds committed, by agents acting in

the course of their business for their principals, have the same effect
on agreements made by such agents as if such misrepresentations or
frauds had been made or committed by the principals; but
misrepresentations made, or frauds committed, by agents, in
matters which do not fall within their authority, do not affect their
principals.

Illustrations
(a) A, being B’s agent for the sale of goods, induces C to buy them by
a misrepresentation, which he was not authorized by B to make.
The contract is voidable, as between B and C, at the option of C.
(b) A, the captain of B’s ship, signs bills of lading without having
received on board the goods mentioned therein. The bills of
lading are void as between B and the pretended cosignor