TOPIC: CONTRACT ACT 1872 (MODULE 3)

THE CONTRACT ACT 1872

Section 1-75 Section 124-238

General Contract Special Contract

1. Law of Indemnity
2. Law of Guarantee
3. Law of Bailment
4. Law of Pledge
5. Law of Agency
Q1. EXPLAIN CONTRACT OF INDEMNITY

I] MEANING:

 Section 124 of the Act defines contract of indemnity,

 as a contract
 by which one party promises to save the other
 from the loss caused to him
 either by the conduct of the promiser or any other person

If X takes legal action against you

I will indemnify you with all the legal

proceedings cost.

Indemnifier Indemnity-holder

 The term indemnity means “to save from loss”

 The liability is contingent i.e. conditional to the happening or non-happening of an

event.

 Indemnity Contracts are Contingent Contract.

II] ESSENTIALS OF CONTRACT OF INDEMNITY:

 There must be existence of loss

 The loss must be occurred either by the conduct of the promisor or any other person,
 Loss by the promisee himself or by Act of God or accident is not covered.
 For a valid Contract of Indemnity, all the essentials of valid contract must be fulfilled.

 Contract of Fire and Marine insurance is contract of indemnity. But there is no

contract of indemnity for Life insurance.
III] PARTIES UNDER CONTRACT OF INDEMNITY:

Indemnifier Indemnity holder

One who promises to One to whom the

save from the loss promise is made

IV] RIGHTS OF INDEMNITY HOLDER [Section 125]:

 When the loss is caused, Indemnity Holder shall have the right to recover from
indemnifier:

a) all damages he may be compelled to pay in suit,

b) all costs incurred in defending the suit,

c) all sums under the terms of compromise in a suit

 Q2. EXPLAIN CONTRACT OF GUARANTEE [SECTION 126]

I] MEANING:

 Section 126 of the Act defines Contract of Guarantee as,

 as a contract
 to perform the promise or discharge the liability
 of third person
 in case of his default.

I need Rs.50,000 Give me some security

as loan and I will (gold, house etc) or
pay back within 3 bring a guarantor
months

B
A
Creditor
Principal Debtor

Don’t worry Mr.B, I will guarantee

Mr.A’s payment

C
Surety

 The term “Guarantee” is a promise to pay a debt owed by a third person in case the
latter does not pay.

 Any guarantee given may be oral or written.

II] PARTIES UNDER CONTRACT OF GUARANTEE:

Principal Debtor Creditor Surety

One who accepts One who grants the One who gives guarantee of
the debt/loan debt/loan debt on behalf of Principal
debtor to the Creditor

III] TRIPARTITE AGREEMENT:

2. Creditor & Surety 3. Surety & Principal

1. Principal Debtor &
Debtor
Creditor

IV] LIABILITIES UNDER LAW OF GUARANTEE:

1. The Liability of Principal Debtor is PRIMARY and the liability of Surety is SECONDARY.

2. The liability of Surety is co-extensive with that of Principal Debtor.

3. In case of default, the Creditor has the right to file suit either only against the Surety or
against both (but the suit cannot be filed solely against the Principal Debtor)

V] ESSENTIALS OF LAW OF GUARANTEE:

1. There must be an existence of a principal debt.

3. Consent of surety should not be obtained by misrepresentation or concealment of a
material fact.
4. Contract of Guarantee can be oral or written.
5. Surety can proceeded against without proceeding against the principal debtor
first.
6. If the co-surety does not join, the contract of guarantee is not valid.
7. The consideration in contract of guarantee is anything done for the principal debtor
of his benefit [Section 127]
Q3. EXPLAIN CONTINUING GUARANTEE & REVOCATION OF CONTINUING GUARANTEE
I] MEANING:
 There are 2 kinds of Guarantee under Contract Act:

SPECIFIC GUARANTEE CONTINUING GUARANTEE

One time for single Series/Multiple of

transaction Transaction

 Section 129 defines Continuing Guarantee as a guarantee which extends to a series

of transaction.

 In the continuing guarantee, the liability of surety continues, until the guarantee is
withdrawn/revoked.

II] REVOCATION OF CONTINUING GUARANTEE:

1. BY NOTICE [SECTION 130]

 A continuing guarantee is revoked by giving notice of revocation to the creditor.

 The liability of the surety ceases (ends) from the date of service of notice to the
creditor.
 However, the surety will be liable for acts done during the guarantee period.

2. BY DEATH OF SURETY [SECTION 131]

 The death of surety acts as revocation of continuing guarantee.

 Notice of death by the legal representatives of the deceased surety will be a
sufficient revocation.

3. BY DISCHARGE OF SURETY:

 If the principal debtor is discharged (released) from his liability, then the surety’s
liability also ends.
Q4. EXPLAIN HOW SURETY IS DISCHARGED FROM ITS LIABILITIES UNDER LAW OF
GUARANTEE
I] MEANING:
The term discharge means “to release” or “to free”
The primary liability is of the Principal debtor and the secondary liability is of the
Surety.
The liability of surety is co-extensive with that of principal debtor

II] MODES BY WHICH THE LIABILITY OF SURETY IS DISCHARGED:

1. BY NOTICE [SECTION 130]

2. BY DEATH OF SURETY [SECTION 131]

3. BY VARIANCE IN TERMS OF CONTRACT [SECTION 133]

If any variance (changes) is made without the knowledge and consent of the surety,
between the Principal Debtor and the Creditor, then the surety is discharged from the
transaction subsequent to the variances.

4. BY RELEASE/DISCHARGE OF PRINCIPAL DEBTOR [SECTION 134]

The liability of surety is co-extensive with that of principal debtor. Thus if the Creditor
discharges the Principal Debtor from his liability, then automatically the surety is
discharged.

5. BY CREDITOR COMPOUNDING WITH THE PRINCIPAL DEBTOR

If the Creditor compounds (settlement) with the Principal debtor, may be accepts a
lessor amount of loan or gives more time, and then the surety is discharged, unless the
surety assents to such compounding.

6. BY CREDITOR USING THE SECURITY OF THE PRINCIPAL DEBTOR [SECTION 141]

If the creditor uses the security provided by the Principal Debtor, then the surety is
discharged to the extent of value of security.

Ex. A took loan from B for an amount of Rs.1 lac and provided a jewelry box worth 1 lac
as a “security” and C acted as a surety for A. Now if B, on failure to repay the loan by A,
sells of the jewelry, the C (surety) is discharged.
7. BY MISREPRESENTATION [SECTION 142]

When the creditor misrepresents the surety regarding any material facts, then the
guarantee is INVALID and therefore the surety is discharged.

8. BY CONCEALMENT [SECTION 143]

When the creditor obtains guarantee by concealing (hiding) or keeping silent over the
material facts, then the guarantee is INVALID and therefore the surety is discharged.

9. UPON FAILURE TO JOIN CO-SURETY [SECTION144]

If the surety was promised that there shall be co-surety then the creditor will not act
upon until such co-surety joins, otherwise the guarantee is INVALID and therefore the
surety is discharged.

III] WHEN SURETY IS NOT DISCHARGED:

1. Agreement by Creditor with 3rd party

When the agreement is made by the Creditor with a 3rd person to allot/give some time
to the Principal Debtor, and not actually with the Principal Debtor, THEN the surety is not
discharged.

2. Mere Forbearance to sue

Mere forbearance (patience) to sue the Principal Debtor by the Creditor does not
discharge the surety.

Ex. B owes C a debt guaranteed by A. The debt has become due and payable. C does not sue
B for a year after the debt has become payable. A is not discharged from his liability.

3. Release of one co-surety

Out of many co-sureties, if the Creditor releases one of them, then the other sureties are
not discharge from their responsibility.

Ex. Ex. X, Y, Z are co-surety to B. Now, B releases X. Y and Z are still liable for their part of
liability.
Q5. EXPLAIN THE RIGHTS AND LIABILITIES OF A SURETY

I] MEANING:

 A Surety provides “Guarantee” i.e. a promise to pay a debt owed by a third person
in case the latter does not pay.

 Any guarantee given may be oral or written.

 On default by the Principal Debtor and on payment of his obligation there are
certain rights enjoyed by Surety.

II] RIGHTS OF SURETY

i) RIGHT OF SUBROGATION [SECTION 140]

 The term “subrogation” means “to substitute”

 On payment by surety for the obligation of the Principal Debtor to the Creditor, the
Surety is subrogated to the position of a creditor.

 Surety may now sue the Principal debtor, just like a Creditor had right to sue.

(1) was liable

Principal Debtor Creditor

(2) paid the obligation of Principal

Debtor
(3) Can claim the amount from
Principal Debtor
Surety
ii) RIGHT TO BENEFIT OF CREDITOR’S SECURITIES [SECTION 141]

 On payment by the surety for the obligation of the Principal Debtor to the Creditor,
the Surety is entitled to all the securities that the Principal debtor has given to the
Creditor.

(1) Provided Surety & and Jewelry box as security

Principal Debtor Creditor

(2) paid the obligation of

Principal Debtor

Surety

iii) RIGHT TO INDEMNITY [SECTION 145]

The term indemnity means “to save from loss caused”

Any loss incurred by the Surety on account of Principal Debtor, then Surety is entitled to
recover from the Principal Debtor whatever sum surety has rightfully

iv) RIGHT OF CO-SURETIES [SECTION 146]

When 2 or more persons are co-sureties for the same debt jointly , whether under the
same or different contracts, with or without the knowledge of each other, then the co-
sureties are liable as between themselves, to pay each an equal share of the whole
debt.

Ex. A, B , C are joint sureties to D for a sum of Rs.30,000/- lent to E. Now E makes default in
payment. Here A, B, C are liable for a sum of Rs.10,000/- each

III] LIABILITES OF SURETY [SECTION 128]

The liability of the surety is co-extensive with that of the Principal Debtor i.e. as long as
the Principal Debtor is liable the surety is liable. Once the Creditor releases the Principal
Debtor the liability of surety will automatically cease.
Q6. EXPLAIN CONTRACT OF BAILMENT

I] MEANING:

 Section 148 defines bailment as

 A bailment is a delivery of goods
 From one person to another
 For some purpose, upon a contract that they shall,
 When the purpose is accomplished,
 Goods be returned or otherwise disposed off according to the directions of the
person delivering them.
Delivers a piece of cloth to
make shirt
 Bailment means “to deliver” or
“to hand over” BAILMENT
BAILOR BAILOR
II] PARTIES:

BAILOR BAILEE

One who delivers One to whom the

the goods for some goods are delivered.
specific purpose

IIi] TYPES OF BAILMENT:

GRATUITOUS NON-GRATUITOUS
BAILMENT BAILMENT Ex. I take care of my neighbor’s pet cat,
when my neighbor is out of town. I don’t
charge any amount for taking care. This
Bailment without Bailment for amounts to Gratuitous Bailment
consideration consideration
IV] ESSENTIALS OF BAILMENT:

1. Contract

 There must be a contract between the bailor and bailee.

 Contract can be expressed or implied.
 A finder of the goods is considered as bailee.

2. Delivery of goods and change of possession:

 In bailment, the goods are delivered from bailor to bailee for a temporary period.
 Upon delivery there is a transfer of possession, not ownership.
 Delivery can be actual or constructive.

3. Delivery of goods is for specific purpose

 In bailment, the goods are delivered for specific purpose.

 When the purpose is accomplished, the goods shall be returned to the
bailor or disposed off as per the direction of bailor.

4. Goods must be moveable only

 Bailment can be done only of moveable goods.

5. Return of specific goods

 When the purpose of bailment is accomplished the goods

have to be returned as per the direction of the bailor.
Q7. EXPLAIN THE RIGHTS, DUTIES & LIABILITIES OF BAILOR

I] MEANING OF BAILMENT

II] BAILOR’S RIGHT

1. To claim compensation for wrongful use of goods

 In case if the bailee makes any wrongful or unauthorized use of

the goods , the bailor can claim compensation for any loss
arising to him due to bailee’s wrongful use.

2. To claim return of goods

 When the purpose is accomplished, it is the duty of bailee and

the rights of bailor to claim return of the goods bailed. And if the
goods are not returned or delivered at proper time, the bailor can
claim compensation for any loss.

3. To claim proportionate share in mixed goods

If the bailee, with the consent If the bailee, without the consent of
of bailor mixes the goods of bailor mixes the goods of bailor
bailor with his own goods with his own goods

The bailor can claim The bailor can claim expenses of

proportionate share in the separation and damages arising
mixed goods from the mixture
III] BAILOR’S DUTIES

1. To put the bailee into possession of goods

 It is the duty of the bailor to deliver the goods to the bailee and
thereby handing over the possession of the goods.

2. To disclose any material defaults in the goods

 The bailor is bound to disclose to the bailee all faults in the goods
which might put the bailee into an extra-ordinary risk while using
the bailed goods.

IV] BAILOR’S LIABILITES

1. To Repay the expenses of bailment

 When the purpose of bailment is accomplished, the

bailor shall have to pay the expenses of bailment to the
bailee.

2. To pay damages for non-disclosure of material facts

 In case if the bailee has suffered loss due to non-

disclosure of material facts by the bailor, then the bailor
is liable to pay damages to the bailee for the faults
arisen.

3. To pay damages for defect in bailor’s title

 Where the bailor was not entitled to make bailment or to give directions with
respect to the goods and if due to defect in bailor’s title, loss is sustained by the
bailee- the bailor is liable to pay the damages to the bailee.

4. To indemnify gratuitous bailee

 Where the bailee is does any act for consideration (Gratuitous bailment) and the
bailor demands the goods back before the time period or before the purpose is
accomplished, then the bailee is entitled to be indemnified by the bailor, in case
of any loss suffered.
Q8. EXPLAIN THE RIGHTS, DUTIES & LIABILITIES OF BAILEE

I] MEANING OF BAILMENT

II] BAILEE’S RIGHT

1. To claim possession of goods

 It is the duty of bailor to put the bailee into possession of goods.

 The delivery of goods may be made to the bailee by doing
anything which has the effect of putting the bailee in possession
with the goods.

2. To know material faults in goods

 It is the duty of bailor to make the bailee aware as to any material defects in the
goods.

3. To claim proportionate share in the mixed goods

 In case of bailor’s goods mixed with the bailee’s good with the
consent of the bailor, the bailee can claim proportionate share
in the mixed goods.

4. To claim damages in case of defect in bailor’s title

 Due to defect in bailor’s title, if the bailee has suffered any losses then the bailee
has the right to claim damages for the same.

5. To claim expenses of bailment

 Under the contract of bailment, if the bailee has incurred any expenses with
respect to the bailed goods, then it shall be the rights of bailee to get it
recovered from the bailor.

6. To claim indemnity

 Under the contract of bailment, if any loss has caused to the bailee with respect
to the bailed goods, then it shall be the rights of bailee to be indemnified from
the bailor.

7. To claim lien or remuneration

 Under the contract of bailment, it shall be the rights of bailee to claim for
remuneration under the contract of bailment and if the remuneration is not paid
then the bailee has the right to lien (retain/withhold) on the bailed goods.
III] BAILEE’S DUTIES

1. To take care of the bailed goods

 It is the duty of the bailee to take care of the bailed goods like a
prudent (ordinary) man.
 The bailee should take reasonable degree of care like a person
does for his own goods.

2. Not to make wrongful use of goods

 It shall be the duty of the bailee not to make any wrongful use of goods.

3. Not to mix up bailed goods with his own.

 It shall be the duty of the bailee not to mix his own goods with the bailed goods.

4. To return bailed goods.

 Upon receipt of all remuneration, expenses, claims, it shall be the duty of the
bailee to return bailed goods to the bailor.

IV] BAILEE’S LIABILITES

1. To pay damages for:

 For failure to take prudent man’s care

 For wrongful use of bailed goods
 Loss arising due to mixing up of the goods
 For non-return of goods

2. To return bailed goods

3. To pay any increase or profit accruing from the goods

Q9. EXPLAIN PLEDGE/PAWN

I] MEANING:

Section 172 defines “pledge” as

 Bailment of goods
 As a security for payment of a debt or performance of a promise
 Is called pledge.

II] PARTIES: Ex. Mr. A took a loan of Rs.2 lac and pledged
his car against the loan as a “security” that
when Mr. A will pay the amount the car be
released.
PLEDGOR PLEDGEE


One who delivers One to whom the


the goods as a goods are delivered.
security

III] ESSENTIALS:

1. The goods must be delivered as a security for payment of debt or

performance of a promise

2. The delivery may be actual or constructive.

3. Pledge can be only of moveable goods.

4. There is a transfer of possession, not ownership

Actual delivery Constructive delivery

Q10. EXPLAIN RIGHTS OF PLEDGOR & PLEDGEE

I] MEANING OF PLEDGE:

II] RIGHTS OF PLEDGOR:

1. Right to get back the goods

On performance of promise or repayment of loan and interest, the

pledgor is entitled to get the pledged goods back.

2. Right to redeem debt

It is the right of pledgor to redeem (repay the debt) and take back his pledged goods,
even if the pledgor makes default to make the payment at the stipulated time. He can
still redeem the debt by paying some extra expenses.

3. Preservation and Maintenance of goods

The pledgor has the right to see that the pledgee, preserves the goods pledged and
maintains it like any ordinary person maintains its goods.

4. Rights of an ordinary debtor

The pledgor enjoys all the rights and protection of an ordinary debtor.

III] RIGHTS OF PLEDGEE:

1. Right of Retainer

The pledgee may retain (hold back) the goods pledged until the entire dues are paid.
The entire dues include the principal amount, interest, any expenses incurred etc.

2. Right of Retainer for subsequent advances

When the pledgee lends some more money to the same pledgor, it will be presumed
that the right of retainer extends even on the subsequent advances.

Ex. A took a loan of Rs.50,000/- and pledged his car worth of Rs.2 lacs. A, later took further
loan of Rs.30,000/-. Now the pledgee can retain the pledged goods for total amount of
Rs.80,000/-
3. Right to extra ordinary expenses

If the pledgee has incurred some extra ordinary expenses for preservation of the
pledged goods then the pledgor shall reimburse the same to the pledgee.

4. Right against the pledgor on default

 He may file a suit against the pledgor

 He may sell the pledged goods, after giving a reasonable notice of the sale to
the pledgor
 After selling, he can recover from the pledgor any deficiency arising from the
sale.
Q11. EXPLAIN PLEDGE BY “NON-OWNERS”

I] MEANING:

 The General Rule, “Only the true owner can pledge the goods”

 However, exception states that in certain cases pledge “non-owners” would also be
considered as valid pledge.

II] WHEN PLEDGE BY NON-OWNERS SHALL BE CONSIDERED AS VALID PLEDGE:

1. PLEDGE BY MERCANTILE AGENT

 Mercantile agent is the agent appointed to sell , buy,

consign, goods in the ordinary course of business

 Thus, a pledge created by Mercantile agent, though

not the owner of the goods, would be a valid pledge.

2. PLEDGE BY SELLER AFTER SALE

 Generally, after sale the ownership and possession of the SELLER

goods gets transferred to the BUYER.

In possession of
 However, if for some reason after sale, the goods are with
goods AFTER sale
the SELLER and the seller pledges the goods, it would be a
valid pledge.
Can create a
Valid Pledge

3. PLEDGE BY BUYER BEFORE SALE

 Generally, before sale the ownership and possession of the BUYER

goods remains with the SELLER.
In possession of
 However, if for some reason before sale, the goods are goods BEFORE sale
already in possession of the buyer with the consent of seller,
and if the buyer pledges the goods, it would be a valid
pledge. Can create a
Valid Pledge
4. PLEDGE BY PRESON HAVING LIMITED INTEREST

A finder of the goods is considered to have limited interest on

the goods. Thus any pledge made by the finder of goods
would be considered as valid pledge.

5. PLEDGE BY CO-OWNER IN POSSESSION

If the goods belong to 2 or more co-owners, any if either of the

co-owner who is in the possession of the goods and with the
assent of the other co-owners may create a valid pledge of
the goods.

6. PLEDGE BY PERSON UNDER VOIDABLE CONTRACT

Where a person obtains possession of goods under voidable

contract, and if he pledges the goods, it will be treated as a
valid pledge.
Q12. EXPLAIN LAW OF AGENCY

I] MEANING:

 Agency is the relation between the AGENT PRINCIPAL

Agent is a person employed Principal is the person for

to do any act for another whom the agent does the act.

 An agent does acts for an on behalf of the principal with 3 rd party.

 Contract of agency is based on the maxim;

“Qui facit per alium facit per se” he who does the act through another does it himself

 Therefore, for all the acts of agent, the principal is liable. Principal
 No consideration is required to create an agency [Section 185]

Agent
II] WHO CAN BECOME AN AGENT AND PRINCIPAL:

Who can become an Agent Who can become an Principal

A major person A major person

A sound mind person A sound mind person

Even a minor person A minor cannot be a

can act as an agent Principal
III] HOW AGENCY IS CREATED?

1. BY AGREEMENT

 Agency can be created by an agreement between agent and principal

 Agreement can either be express or implied
 Express agreement can either be oral or written. Implied is entered by the act and conduct
of parties.

2. BY NECESSITY

 In certain circumstances, law confers the authority on the person to act

as an agent for the benefit of the other; this is called Agency by
necessity.
 If an agent exceeds his authority during emergency, in the interest of
principal, then his act is considered to be valid.

3. BY ESTOPPEL/BY HOLDING OUT

 “Holding out” means “to represent”

 If any person represents other in such a way to the 3 rd party that the 3rd party is under the
impression that the person held out is the agent, is called Agency by Holding Out.
 Now with this the principal is bound by acts of the person held out, he cannot deny later as
he will be estopped from denying what he earlier stated.

4. BY RATIFICATION

 Ratification means “to accept later”

 If any person does any act, without the knowledge or authority of the
other person, and if the other person elects to accept, then it shall be
treated as Agency by Ratification.
IV] TYPES OF AGENT

1. SUB AGENT

 An agent’s agent is called sub-agent.

 Based on the maxim of “A delegate cannot further delegate”, an agent cannot give authority to
another person to do the work of the Principal. Thus, for all the acts of sub-agent, the agent
shall be liable.
 If the sub-agent is properly appointed, with the consent of the Principal, then the Principal is
liable for the acts and conduct of the sub-agent as well.
 The termination of agent’s authority terminates the authority of the sub-agent.

2. SUBSTITUTE AGENT

 When the agent names another person to act for the principal for a specific transaction, then
that is a Substitute agent.
 For the acts of Substitute agent, the principal is responsible.

3. PRETENDING AGENT 3. PRETENDING AGENT

 When a person untruly represents himself to the authorized agent of the other, and thereby
inducing the 3rd party to deal with him as an agent, is called Pretending Agent.
 It is a false representation of authority on the 3rd party, of which the principal shall be unaware.
Thus, the 3rd party can file a suit against the pretending agent personally.

V] TERMINATION OF AGENCY

1. By act and conduct of parties

-by agreement with mutual consent

-by notice of revocation by the agent

- by notice of revocation by the principal

2. By operation of law

-by death or insanity of either principal or agent, agency is terminated

-by insolvency of the principal, agency is terminated

-in case of company being wound up, agency is terminated

3. Other modes of termination

-by destruction of subject matter of agency

-by happening of an event-which makes the agency or its objects unlawful

-by frustration of agency

-by Principal becoming alien enemy

-by winding up of the company

Q13. EXPLAIN THE POWER/AUTHORITY/RIGHTS, DUTIES AND LIABILTIES OF AGENT

I] MEANING OF AGENCY

II] POWER/AUTHORITY/RIGHTS, DUTIES AND LIABILITIES OF AGENT

AGENT
POWER/AUTHORITY/RIGHTS DUTIES LIABILITIES
-to do all lawful things -not to delegate his authority -Liable for the acts of sub-agents

-to act prudently to protect -use discretion in selecting an -Liable to account for profits

principal’s interest agent for principal

-to appoint agent for the principal -conduct business as per the -For loss due to acting contrary to

direction of the principal directions

-to renounce agency -to render proper accounts -For loss due to neglect/want of

skills

-to claim compensation for pre- -to communicate all facts to the -Liable for fraud

mature revocation of authority principal

-to take reasonable steps to protect -not to deal on his own

the interest of Principal’s legal

representative

-to retain sums received for the -to disclose material facts

principal

-to claim remuneration -not to conceal any facts

-to detail the sale proceeds/lien

-to claim indemnity

Q14. EXPLAIN THE POWER/AUTHORITY/RIGHTS, DUTIES AND LIABILITIES OF PRINCIPAL

I] MEANING OF AGENCY

II] POWER/AUTHORITY/RIGHTS, DUTIES AND LIABILITIES OF PRINCIPAL

PRINCIPAL
POWER/AUTHORITY/RIGHTS DUTIES LIABILITIES
To ratify agent’s act To pay remuneration To pay remuneration

To disown agent’s act To pay for any expenses To pay for any expenses

To revoke agent’s authority To indemnify the agent To indemnify the agent

To claim profit/loss due to acting To compensate the agent for To compensate the agent for

against the direction the loss caused the loss caused

To repudiate certain transaction Bound by unauthorized act , if

3rd party is induced

To claim secret benefits Liable for fraud and

misrepresentation of agents

May not recognize transaction

beyond the authority

************************************************************************************************
Note: Distinguish between has to be studied from your respective textbooks