II YEAR I SEMESTER B.A.LL.B. (HONS.

) DEGREE

Law of contract II

“Personal liability of Agent “

SUBMITTED TO:- Mr.C.R. Shriram

SUBMITTED BY:- Abhisek Dash

I, Abhisek Dash do hereby declare that the research project entitled “Personal liability of
Agent”
And independent work done by me under the supervision and guidance of Mr.C.R. Shriram.,
Faculty of Law (Contracts-II), Tamil Nadu National Law University; Tiruchchirappalli. All
information furnished in the project for scrutiny is true to the best of my knowledge and belief
devoid of plagiarism. If plagiarism under the circumstances is truly established, the Law School
may be pleased to proceed with any action against me according to the University’s rules and
regulations.
 CERTIFICATE

This is to certify that the research project entitled “Cartels and partnerships” submitted to the Tamil
Nadu National Law School; Tiruchchirappalli, in fulfillment of the requirements for internal
component for B.A; LL.B (HONS.) in Contracts--- II, Third Semester, is an authentic and bona-fide
research work carried out by Abhisek Dash under my supervision and guidance. No part of this study
has been submitted to any University for the award of any Degree or Diploma whatsoever.
Mr. (C.R. Shriram)
Date: 22/10/2018
Place: Tiruchchirappalli.
 ACKNOWLEDGEMENTS

At this juncture, a long list of acknowledgements should obviously follow after the successful
completion of my herculean project and as a student it is my profound duty to duly acknowledge
the co-operation of many persons without whose unwavering support and conviction, it would
have become highly impossible for me to accomplish this endeavor within a short span of time.
Though I feel elated by the fact this project has taken its present shape due to the involvement
and dedication of many persons in the background who have contributed immensely towards this
project but listing all of them and thanking them individually seems to be absurd. In return, they
all have my sincere thanks and heartfelt gratitude for their unforgettable commendable
contributions. The literature of the cartels and partnerships initially wasn’t easy for me to digest.
I read and re-read the Act many times for my own understanding before deciding to write the
own script for my project. Firstly, I fervently thank my faculty who has been of invaluable help
towards this project. Despite his hectic schedule round the clock (even couldn’t spare time
during weekends), he stood as a backbone especially revising the initial script of my project by
suggesting and guiding me constantly during critical stages of the project. I am, forever, indebted
to him as a student. I am indebted to my parents for their unfettering support and loyalty which
rejuvenated me when my energy faded during critical stages of the project.
 CONTENTS

1. Introduction
Scope of the principle
2. Foreign principal
3. Principal unnamed
Test to determine unnamed principal
4. Nonexistent or incompetent principal
5. Exceptions
6. Conclusion
7. Bibliography
 CHAPTER-I

INTRODUCTION
It has already been established that the most significant function of the agent to make a
contractual relationship between principal and third parties 1. There the function or the work of
the agent ends. That’s why the agent neither can be sued nor can sue any one – the contract made
by principal and third party.2 The agent can’t make any contract in the absence of principal but if
the agent has done so it need to be ratified by the principal. Section 230 3 expressly provides the:
if there is lack of any contract then the agent would be liable for the contract made by him. In the
case of Port of Madras v Southern Shipping Coprn. Pvt. Ltd. 4- A consignment reached the
port of madras. It should be taken out from the port by the agent where principal was not aware.
The court decided that it was the duty of the agent to take out the consignment from the port. So
what the extra amount of money has been charged by the port authority need to be paid by the
agent on the duty to take out the consignment. In a similar judgment of Jayteee Export v Natver
Parekh Industries 5the Calcutta High Court it was decided that though the principal was
involved in the contract the agent would not be liable, unless there is a contract binding on the
agent. Earning mere commission for being an agent does not make him liable. This is known as
the agent’s personal immunity in a contract.

In the case of Lewis v Nicholson6 the court decided that the principle of agent immunity even
will be applied where the agent has done a contract beyond his authority but he will not be
should and liable , only the agent have to give compensation. The section 230 of Indian
Contract Act, 1872 again provides that in some cases the agent would personally liable in various
circumstances.

SCOPE OF THIS PRINCIPLE

1
Contract and specific Relif Act , avtar singh
2
Marine container service v go go garments ,1908,AIR1909,SC 60
3
Indian contract act, 1872
4
Port of Madras v Southern Shipping Corpn (p) Ltd, AIR,2001,Mad 413
5
AIR,2001,cal -150
6
Lewis v nichlson ,1852,18QB 503
In order to apply this section there must be a contract between the third parties and agent,
without this contract the above provision can’t be applied if the contract between the above
mentioned parties don’t exist. This is the prereqsite to hold the agent personally liable7.

Agent has been defined in the section 182 of the Indian contract Act, 1872. A person has been
permitted to represent another in a dealing with the third party8.

7
Commentary on law Releating to the contract act and tenders , act .ix of 1872
8
Sec 182,Indian contract act, 1872
 CHAPTER-II

FOREIGN PRINCIPAL

When an agent act for his principal who does reside in the abroad, he would be personally liable
for his act. There is a presumption in this circumstances that the agent has under taken the
personal liability under the section 230(1) Indian Contract Act, 1872 9. The whole objective in the
English law was that though the master resides in the foreign he can’t be brought under the
domestic jurisdiction, so the agent who is acting in the country for him would be liable under the
law of the land .if a foreign principal will be sued it will involve a lot legal technical arguments
as well as precious time of the court. 10 But now the scenario has been changed. With the passage
of time the international trade law has evolved and including this mutual trust between the
merchants has increased.11 In the case of H.O Brandt and co v HM Morriss and Co Ltd. Scrutton
12
J SAYS the law which was valid before forty-five years can’t be held valid still now, a lot of
water has been flowed in the Thames .In England the principal was considered as foreigner but
he can be sued successful now so the agent should not be further be sued in the place of
principal. Where a contract was made not to make liable the agent, the agent should not be held
liable. Nandan Iron and Metal Industries v Fensity Inc13 the contract expressly provided that
the agent can’t be sued for the principal liability. The third party sued the agent where agent took
the defense that in the contract it was explicitly mentioned that agent will not be liable for the
principal any manner so the agent was not held liable for.

There was suit filed agnist the foreign principal. So the Indian agent and principal would not be
liable for this. But in India a foreign registered company’s agent was held liable.

Civil procedure code section 86 does not bar a foreign government in this country especially
when those governments carry on trade. 14 The section 230(3)15 allows that if the person can’t be
sued the agent will be sued if the agent is a foreign national and can be successfully sued in
Indian so this provision will not be come into effect. It can also happen that there are various

9
Contract and specific Relif act ,1872,Avtar Singh
10
National Textile Corpn. v Naresh Kumar v Badri Kumar
11
Chetty on Contract , 2011
12
HO Brandit and co v H.M.Moriss, 1909.
13
AIR, 2005, SC 57
14
Civil procedure code ,1980 section 86
15
Indian contract act , 1872
person entered into the contract but some are from foreign, those are citizens can be successful
sue and agent will not be held personally liable16.

In the case where plaintiff or third party chose to sue the foreign national then the agent would
automatically relived from its liability. So here the plaintiff has the option to choose defendant
no 1 or defendant no2. Both the defendant can’t be sue .there must be an selection by the plaintiff
what plaintiff wants 17

Where he agent adds words to signature which shows that the agent has signed for principal, the
contract can’t be construed personally liable.in the famous case of “Mahant Ramnaryan Das
Goswami 18case the expenses what incurred Muth was brought by an agent who has mentioned
the name of principle, even the plaintiff agreed to it .the court declared that the principle will be
held liable and the reimburse can be made from the Muth for which it has been spent.”

The agent has the right to sue and get back the amount of money which has been spent by him
under mistake of fact, or in respect of a consideration which he has paid for the principal. This
has been developed by the natural justice that no one should be unjustly enriched.19

CHAPTER-III
16
Contract and specific Relif act, 2015, Avtar Singh
17
Commentary on contract , Sanjiva Rows, Delhi Law House
18
AIR1988, SC 112
19
Ansons law of contract, 29th edition 2014
PRINCIPAL UNNAMED

The agent is duty bound to disclose the name of the principal 20. Where the agent does not
disclose the name of the principal thus he becomes a party to the contract as well as case
personally liable to be sued and lost the immunity to be sued .even when the principal is
unnamed the agent would be liable, this presumption raises where he mentions him as an agent
but does not disclose name the principal21. Bhojabhai v Hayen 22Samuel a house was rented for
the school. The honorary sectary acted as the agent in this contract. The school failed to pay for
the rent taken by them he held to be personally liable for this. But in the very similar case the
sectary of the club disclosed as he an agent working he was not held liable personally. The same
result does follow where this certain representative or agency nature has been disclosed.in such
cases the form of case will be deciding.

In an English case Southwell v Boudtich23 the agent has signed the contract in his own name
but mentioned the name of his principal, the court declared that the master will be held liable.
Though the agent has declared his position as well as declared the name of the principal he can’t
be held liable for this. Where one broker has send phone to other broker with due expression that
he is working as an agent he was not held liable to be sued for this .the general principle that the
name of the principal was disclosed.in a similar case where the agent forwarded the remark that
we can do this for u rather disclosing the name of his principal was held to be liable personally.

“Marikar Motrs Ltd. v Lalan Carmu a case was filed agnist dealer of the motor vehicle. He in
his defense told to be acting as an agent where the motor company as his principal so he should
not be held liable for that. The state consumer forum held him liable to be sued and personally
liable because this defense does not apply to this fact and circumstances of the case”24.

In the case of Union of India v Joytemoyee25 the contract was ratified by the principal though
the knowledge of contract was not to the principal during the contract. Later on principal ratified
it so the court held that though the contract has been ratified the principal will not held liable.

20
Indian contract act, 1872
21
Raj kishor chottray Gopabandhu Das,1974,Orissia HC
22
1885
23
Loyds Rep,135
24
AIR 2002, SC 3109
25
AIR 2011,SC 83
Whatever the fiduciary relation must be exist between the principle and agent if the principal has
been unnamed, he can’t be sue, and the agent would be personally liable. 26

TEST TO DETERMINE UNNAMED PRINCIPAL

To test the liability of the agent to third parties is weather credit was given to the agent or the
principal. Prima facie a person who do sign in the agreement becomes liable but if the principal
has come in the connection with the principal then the agent would not be held liable.27

If a man tells himself as a broker but doesn’t knowingly or unknowingly the name of the
principal he will be held guilty. If a corporation seek s loan on behalf of government if it does
not mention the name of the government and with other due requirement then corporation would
be held liable.28

A broker is primarily an agent to establish privity of contract between two parties 29. He is prima
facie employed to find out a buyer or a seller and such a mere intermediary. He may however, go
beyond and make himself a party to a contract of sale or purchase as the case may be. Where he
is merely an intermediary, he is not liable under the contract. But where he has gone beyond and
has entered into a contract of sale or purchase on behalf of his principle the provisions of the
30
contract would be applied.Kalka Prshad v Sarju Prashad Justice Dar the position of the
auctioneer is that of like shareholder in this case.

CHAPTER IV

INCOMPETENT PRINCIPAL

26
Ansons law of contract , 29th edition , Oxford,
27
Commentary on law relating to the contract act 1872 and tenders, Delhi Law House.
28
Contract and specific Relif Act, Avtar Singh, 2015
29
Commentary on law relating to the contract act 1872 and tenders , Delhi Law House
30
AIR 1956,SC 201
An agent would be liable personally if the principal is incompetent to be a party to the contract.
Though the agent have disclosed the name of the principal still in this circumstances he would be
liable for the. The principle of “agent not liable if he is disclosing the name of the principal” does
not work because the disclose principal is incompetent to the contract. 31So the law possess the
duty on the agent that the principal‘s competency should be tested successfully by him. If there is
any mistake committed by him during that period he would be personally liable. The
incompetency may be any kind for example minority, insanity during the signing the contract or
insolvent.32

There can be various principal which can’t be sued though they are disclosed. In this case the
agent will be held personally liable. In the case of anybody which has not been duly registered
under the law can be held responsible. Noncompliance with this makes the contract non
enforceable. And wholly void agnist the Government of India. Though the contract is invalid
between government of India and the plaintiff but it will be stilt valid between the plaintiff and
the agent. So agent will be held personally liable 33

In the case Chaturbhuj Vithdas v Moreshwar Parshuram34 the Supreme Court has laid down
that such contracts, though unenforceable agnist the government are binding upon the servant
who has done this so they may held personally liable.

There is no question of any redundancy in the first case in the second part of sec 230 nor does the
maxim expression unis exclusion alterius have any application in interpreting the three case in
the second part. Neither is there any possibility of two interpretation in the section. it may be
pertinent in this context to refer to two section of the contract section 233 sec 234 section 233
say where the the agent is personally liable – the party dealing with the agent or principal will be
only liable.

There is both principle and logic in providing for the principal personally liable in respect of
contract vis-a vis the third party in respect of three cases enumerated under the said section.

31
Ansons law of contract , 29th edition , Oxford
32
Contract theory Limits of contract, 6th edition, 2013

33
Raj kishor chottray Gopabandhu Das,1974,Orissia HC
34
AIR 2011,SC 83
In all these case agent can be sue and also have right to sue. Because it will be agnist the natural
justice where only person only if can be sue and can’t sue.

EXCEPTION

PERSONAL LIABLITY OF THE DIRECTOR OF THE COCMPANY

Directors of the company are not do act as an agent in the contract though it seems to be acting
like an agent. So there are not liable under this said provision.in the conventional sense of
principal agent relationship the directors are not liable. There are not liable in the damages for
breach of the contract committed by their company. Even if they are agents, section 230 gives
special immunity to them. The directors of the company do act like agent for the company.

There is an exception in to this provision- if the principal has meet the third party then the agent
would not be liable. There should be a nexus between the agreement and the meeting if there is
no connection between the exceptions will not be held valid.

The expression principal can’t be sued does not bear a restricted meaning so as to confine the
question to the territories in India only. The said expression has a wider amplitude and would
cover cases where the principal can be sued in the foreign countries as well as case here

CONCLUSION
The principal can’t do all the due works so as to assist him doing business agent works. The most
important work of the agent is to connect third party and principal. But the circumstances where
agent is liable though he get personal immunity according section 230 of Indian Contract Act,
1872

There are some instances where the agent undertakes the liability. It depends upon the proper
construction upon the conduct of the parties. This can be done orally as well as in written.
Agreement can be made where the agent will be a party to the deed so through this an agent can
be sued. An agent who signs as a party to negotiable instrument such as a bill of exchange or
promissory note either as drawer indoser or acceptor will be personally liable even though words
which describes the agent as such as filling a representative character.

BIBILOGRAPHY
1. The Law of Contract by Fifoot, 13th edition, 2011

2. Chitty on contracts, 5th edition, 2003

3. The Indian contract act by Mullah, 11th edition, 2013

4. Law of contract and specific relief Act, Avatar Singh, EBC Publication, 2015

5. Just Exchange the theory of Contract by Buckley, 3rd edition, 2004

6. Contract theory Limits of contract, 6th edition, 2013

7. Limits of voluntaries of contract the modern law of contract by Richard Stones, 2nd edition
2015

8. Contractual law by Dummies 2013

9. The Responsibility Revolution: How the Next Generation of Businesses Will Win by Jeffrey
Hollender and Bill Breen with Foreword by Peter Senge(Jossey Bass, 2010)

10. Ansons law of contract , 29th edition , Oxford,