CHAPTER X
AGENCY

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".

Nature of agency in general.---Chapter X of the Act has been stated to be not exhaustive, but to lay down general principles in wide and general terms. The law stated in the introductory group of sections (182-189) under this heading is too elementary to need much exposition. The essential point about an agent’s position is his power of making the principal answerable to third persons. A person does not become an agent on behalf of another merely because he gives his advice in matters of business. Nor is a person referred to in a contract as agent an agent if by the terms of the contract the relationship is one of principal and principal.

In a Calcutta case the view has been expressed that the definition in S. 182 did not require that the employment should be by the person for whom the agent is employed to act or whom he is employed to represent. The case was one in which a common manager had been appointed by the District Judge under the Bengal Tenancy Act, 1885, S. 95, and the Court was of opinion that the definition in S. 182 applied to him. It is submitted that this is a very doubtful proposition of law, nor does it seem to have been necessary so to hold for the purposes of the case. A statutory manager so appointed occupies a position analogous to a receiver appointed by the Court, who is the agent of the Court alone; and S. 183 of the Contract Act seems clearly to show that this part of the Act is concerned only with agents who become such by the volition of the principal who appoints them.

The legal relation between a merchant in one country and a commission agent in other is that of principal and agent, and not seller and buyer, though this is consistent with the agent and principal, when the agent consigns the goods to the principal, being in a relation like that of seller and buyer for some purposes. A merchant, therefore, in this country who orders goods through a firm of commission agents in Europe cannot hold the firm liable as if they were vendors for failure to deliver the goods. And the result is the same if the goods are ordered through a branch in this country of a firm of commission agents in another country. For the same reason, where a commission agent buys goods for a merchant at a price smaller than the limit specified in the indent, he cannot charge any price higher than that actually paid by him, except in the case of a custom to the contrary.

An agent may have, and often has, in fact, a large discretion, but he is bound in law to follow the principal's instructions provided they do not involve anything lawful. To this extent an agent may be considered its a superior kind of servant; and a servant who is entrusted with any dealing with third persons on his master's behalf is to that extent an agent. But a servant may be wholly without authority to do anything as an agent, and agency, in the case of partners, even an extensive agency, may exist without any contract of hiring and service. A dewan of a zamindar has been held to be a servant rather than an agent.

Co-agents.----Two or more persons may be employed to act as agents jointly or severally, or jointly and severally. In the absence of circumstances indicating an intention to the contrary, an authority given to two or more persons is presumed to be given to them jointly and not severally, and in such case it is necessary that they should all concur in the execution of the authority in order to bind the principal, unless it is provided that a certain number of them shall form a quorum. There is, however, an exception to this rule where the authority conferred is of a public nature. In such a case, if all the persons in whom the authority is vested meet for the purpose of exercising it, the act of the majority is considered that of the whole body. Where authority is given to co-agents severally, or jointly and severally, any one or more of them may exercise it so as to bind the principal without the concurrence of the other or others.

Agency---Contract of---Agent---Authority and liabilities of---Held: Agent to act as intermediary for consideration, always to account for sale proceeds to principal and to have power to deal with third persons so as to bind his principal---Held further: Subject matter of agency to be dealt with as property of principal and not as that of agent.

Agent---What is---Dealer of-petrol company is not an agent.---The dealer of the petrol company paid for the petrol he bought from the company and had deposited a sum as deposit for the equipment and construction of the pump. It was contended that he was an agent of the company.

Held: According to section 182 of the contract Act "an agent is a person employed to do any act for another or to represent another in dealings with third person." In selling the petrol the plaintiff would have done an act principally for, and on behalf of himself because he would have been selling his own goods which he has purchased from the defendant and not merely acting as an agent or intermediary between the customers of petrol add the company. He was not given, or at any rate has not been shown to have been given, any power to deal with third person so as to bind the defendant, a power which is an indispensable ingredient of agency.

Agent---What is---Negligence by agent---Agent responsible for the loss occasioned to the principal.---In order to determine whether a party stands in the relation of agent or principal in reference to the other contracting party, the nature of the agreement and the course of business have to be taken into account. Under section 182 of the Contract Act an agent is a person employed to do any act for another or to represent him in dealing with third persons.

In law whether an agent is acting gratuitously or otherwise he is responsible for negligence in the discharging or his duties.

An agent who negligently omits to comply with the clear instructions of his principal must be regarded as guilty or gross negligence and, whether the bank was acting as gratuitous agent or not, I consider that it was responsible to the plaintiff for any loss occasioned by the negligence.

Relationship between banker keeping pledged share scrips and pledgor of share scrips---Covered by definition of "agent"---Pledgee bank while delivering pledged share scrips to purchaser---Acts as agent of pledgor.

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.

As between the principal and third persons, the act of an agent is looked upon as the act of the principal who authorised it. Hence the rule that a person who has no. capacity, or only a limited capacity, to contract on his own behalf is competent to contract so as to bind his principal. An income-tax notice delivered by a postal peon to the assessor's son who was a minor and possessed of ordinary intelligence has been held to be a good service on the assessee, and the fact of an agent being unable to read or write has been held to constitute no ground for the avoidance lay the principal of a written contract made by the agent on his behalf.

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

By the Common Law no consideration is required to give a man the authority of an agent, nor to make him liable to the principal for negligence in that which he has already set about, for such liability though it may be defined by the terms of a contract, is in its nature independent of contract; but a merely gratuitous employment or authority does not bind the agent to do anything; and if, having neither reward nor promise of reward, he does nothing at all, the principal does not appear to have any remedy. But this distinction is of little practical importance, if any.

186. Agent's authority may be expressed or implied.---The authority of an agent may be expressed or implied.

Principal impliedly ratifying acts of agent---Cannot disown liability arising therefrom.

187. Definition 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.

A owns a shop in Quetta, living himself in Karachi 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.

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Implied authority.---It is needless to cite authorities to show that the ordinary course of affairs must be regarded in order to ascertain the extent of an authority not defined except by the general nature of the business to be done. "A person who employs a broker must be supposed to give him authority to act as other brokers do". It might be difficult, but happily there is no need, to draw a clear line between cases falling under the latter part of this section and those falling under the second paragraph of S. 188. As to the saving of usages of trade under this Act, see on S. 1, above.

A power of attorney authorising the holder "to dispose of" certain property in any way he thinks fit does not imply an authority to mortgage the property. An authority given to a military officer to sell goods lying in a particular area does not imply an authority to sell goods in another area. Nor does a power of attorney to an agent to carry on the ordinary business of a mercantile firm imply an authority to draw or indorse bills and notes. Authority on dissolution of partnership to settle the partnership affairs does not authorise the drawing, accepting or indorsing of bills of exchange in the name of firm. Where the principal carries on a general money-lending business, the authority to the agent to borrow implies an authority to pledge the principal’s credit for the purpose of obtaining or securing advances from others to customers.

In determining questions involving the relationship of a public servant to the Crown, and the liability of the State for acts of public officers, the principles of the ordinary law of agency cannot be applied except with considerable qualifications. An individual principal is liable to the extent authority is apparently given, but the State is liable only to the extent authority has actually been given.

Exclusive agency.---Appointment of a "sole agent" does not preclude the principal from acting himself in the business of the agency without being accountable to the agent. Only an express prohibition would have that effect.

Husband and wife.---This is a special and important case of implied authority. The liability of a husband for a wife's debts depends on the principles of agency, and the husband can only be liable when it is shown that he has expressly or impliedly sanctioned what the wife has done. Thus a person dealing with a wife and seeking to charge her husband must show either that the wife is living with her husband and managing the household affairs, in which case an implied agency to buy necessaries is presumed, or he must show the existence of such a state of things as would warrant her in living apart from her husband and claiming support or maintenance, when, of course, the law would give her an implied authority to bind him for necessaries supplied to her during such separation in the event of his not providing her with maintenance.

It is now settled that "the question whether a wife has authority to pledge her husband's credit is to be treated as one of fact, upon the circumstances of each particular case, whatever may be the presumption arising from any particular state of circumstances.

Statutory Authority, officer of---Enjoys authority actually vested in him---Cannot exercise powers beyond his authority. Whereas an individual principal is liable to the extent the authority is apparently given, the public authority is liable only to the extent, authority is actually given.

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.

(a) A is employed by B residing in London, to recover at Karachi 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 shipbuilder. B may purchase timber and other materials, and hire workmen for the purpose of carrying on the business.

Extent of authority.--It is well settled that an agent's authority is, in Story's words ( 58), "construed to include all the necessary and usual means of executing it." If its terms are ambiguous, the principal will be held bound by that sense in which the agent reasonably understood and acted upon them. Further, an authority is generally construed in case of doubt according to the usual course of dealing in the business to which it relates, partly because this may be presumed to have been really intended, and partly because third persons may reasonably attribute to an agent such authority as agents in the like business usually have. This last reason has been extended to holding an undisclosed principal liable for a purchase on credit which he had expressly forbidden the agent to make. As in the case of an undisclosed principal there can be no apparent authority, and in fact there was no real authority, the correctness of this decision is doubtful. It rather seems that the rule applies only where credit is given not to the agent alone, but to the principal or firm which he apparently represents.

Construction of powers of attorney.---A power of attorney is a formal instrument by which authority is conferred on an agent. Such an instrument is construed strictly, and confers only such authority its is given expressly or by necessary implication.

One of the most important rules for the construction of a power of attorney is that regard must be had to the recitals which, as showing the scope and object of the power, will control all general terms in the operative part of the instrument. Thus, where it was retired that the Principal was going abroad, and the operative part gave authority in general terms, it was held that the authority continued only during the principal's absence.

Another rule is that where special powers are followed by general words, the general words are to be construed as limited to what is necessary for the proper exercise of the special powers, and as enlarging those powers only when necessary for the carrying out of the purposes for which the authority is given.

Where power was given to demand and receive all moneys due to the principal on any account whatsoever, to use all means for the recovery thereof, to appoint attorneys to bring actions, and revoke such appointments and to do all other business, it was held that the words "all other business" must be construed to mean all other business necessary for the recovery of the moneys, and that the agent had no authority to indorse a bill received by him in pursuance of the power. Where an executor gave a power of attorney to transact in his name all the affairs of the testator, it was held that the agent had no authority to accept a bill of exchange in the name of the executor so as to bind him personally.

A power of attorney is, however, construed as including all incidental powers necessary for carrying out its object effectively. A power to commence and carry on all actions, suits, and other proceedings, touching anything in which the principal might be in anywise concerned was held to authorise the signature by the agent on behalf of the principal of bankruptcy petition against a debtor of the principal.

Authority to do every lawful thing necessary for the purpose.---The authority conferred by this section to do things necessary for a business may be excluded either expressly or impliedly by the terms of the agency. Thus where A appointed B manager of his silk factory, anti executed in his name a power of attorney specifying his powers and authority but the document gave no authority to B to borrow, it was held that A was not liable for money borrowed by B as manager and attorney of A. Sections 187 and 188 would no doubt authorise a manager to borrow if necessary; but such general provisions are subject to modifications in particular cases, and in this case they were so modified, for the manager had been allowed no power to borrow.

Authority of counsel, attorney, and pleader.---Though the relation between a client and an attorney or pleader is that of principal and agent, it is not so in the case of counsel. Nevertheless counsel, unless his authority to act for his client is revoked and such revocation is notified to the opposite side, has, without need of further authority, full power to compromise a case on behalf of his client. Counsel is clothed by his retainer with complete authority over the suit, the mode of conducing it, and all that is incident to it, and this is understood by the opposite party. But this authority does not extent to a compromise of matters outside the scope of the particular case in which he is retained, nor to referring the case itself to arbitration on terms different from those which the client has authorised. According to the Calcutta High Court, the general authority of Counsel (whether barrister or advocate) extends in India only to compromises in Court. The whole subject has more lately been reviewed by the Privy Council without mention of this distinction. An attorney is entitled in the exercise of his discretion to enter into a compromise. if he does so in a reasonable, skillful, and bona fide manner, provided that his client has given him no express directions to the contrary. In one case on the subject, the Court found that the client had authorised his attorney to compromise, and that the compromise was reasonable and proper. According to a Madras decision, the case of a pleader stands on a different footing, and he cannot enter into a compromise on behalf of his client without his express authority. A Full Bench of the Nagpur High Court has, however, decided that counsel in India, whether barristers, advocates, or pleaders, have inherent powers both to compromise claims, and also to refer dispute before the Court to arbitration, without the authority or consent of the client, unless their powers in this behalf have been expressly countermanded, and this whether the law requires a written authority to ‘act’ or ‘plead’ or not. A solicitor has no implied authority to make a contract on behalf of his client, but if the solicitor is authorised to enter into a contract of sale of property on the ‘usual terms’, and these words have, in the circumstances, a definite meaning, he has authority to enter into a contract binding on his clients.

Authority of factor.---A factor to whom goods are entrusted for sale has authority to sell them in his own name, on reasonable credit, at such times and at such prices as in his discretion he thinks best, to receive payment of the price where he sells them in his own name, and to warrant the goods sold, if in the ordinary course of business it is usual to warrant that particular kind of goods. But he has no implied authority to barter the goods, nor to delegate his authority.

Authority of broker.---A broker authorised to sell goods has implied authority to sell on reasonable credit; to receive payment of the price if he does not disclose his principal; and to act on the usages and regulations of the market in which he deals, except so far as such usages or regulations are unlawful or unreasonable. A usage which, by converting the broker into a principal, changes the intrinsic nature of the contract of agency is regarded as unreasonable. He has no implied authority to cancel, or vary contracts made by him; nor to receive payment of the price of goods sold on behalf of a disclosed principal, nor even when the principal is undisclosed, has he implied authority to receive payment otherwise than in accordance with the terms of the contract of sale. A broker authorised to buy shares, purchase of which requires the previous permission of the Government, has implied authority to obtain such permission.

A policy broker authorised to subscribe policies on behalf of an underwriter has implied authority to adjust a loss arising under a policy and to refer a dispute about such a loss to arbitration. But he has no implied authority to pay total or partial losses on behalf of the underwriter. Nor has a policy broker implied authority to cancel contracts made by him, or to receive payment from underwriters of a sum due under a policy by bill of exchange, or by way of set-off, even if there is a custom by which a set-off is considered equivalent to payment as between brokers and underwriters, unless the principal had notice of the custom and agreed to be bound by it at the time when he authorised the broker to receive payment.

Authority of auctioneer.---An auctioneer has implied authority to sign a contract on behalf of both buyer and seller, an authority which does not, however, extend to his clerk. The implied authority of an auctioneer to sign on behalf of the buyer does not, however, extend to a sale of unsold lots by private contract subsequently to the sale by auction. An auctioneer has no implied authority to take a bill of exchange in payment of the deposit, or of the price of goods sold, though it is provided by the conditions of sale that the price shall be paid to him. Authority to sell by auction does not imply any authority to sell by private contract, in the event of the public sale proving abortive, though the auctioneer may be offered a price in excess of the reserve. Nor has an auctioneer implied authority to rescind a contract of sale made by him, nor warrant goods sold; nor to deliver goods sold except on payment of the price or allow the buyer to set off a debt due to him from the seller.

Authority of shipmaster.---The extent of a shipmaster's authority to bind his principals personally by contract, or to sell or hypothecate the ship or cargo, is governed by the law of the flag.

Corporation.---An agent of a corporation or an incorporated company cannot have any authority express or implied, to do any act which is ultra vires the corporation or company.

Principal and agent---Extent of agent's authority---Defendant adducing in evidence letter of admission issued by shipping agent of plaintiff but no objection raised al production of document that the same was issued by agent without any authority or in excess of authority---Plaintiff at arguments stage contending that letter was issued by shipping agent without any authority vesting in him---Agent proved to be authorised to forward goods and ship them---Witness producing document not cross-examined to the effect that letter was written without authority---Even no effort, made to summon agent or amend plaint by impleading him as defendant for having given undertaking without authority---Held: document was written by forwarding agent of plaintiff with his authority given by plaintiff---Further held, agent having authority to do act has authority to do any lawful thing necessary to do each act.

Cotton forward contract through agent---Agent making payment on due date on behalf of principal----Principal bound to reimburse agent.---Where the agent paid up the losses on a cotton forward contract on behalf of his principal and it was contended that it being a wagering contract, the principal was not bound to reimburse the agent. Held: that the contracts may be wagering but if they are made through the brokers or commission agents who are not concerned with the nature of the transactions and who carry on business for their principal in consideration of the commission charges, then the transaction between the principal and the agent is not necessarily a wagering contract nor one against public policy. Thus where plaintiff, a commission agent bets in his own name for the defendant and pays the losses, the plaintiff can recover from the defendant the sums so paid. But an agent so authorised to enter into a wagering contract can claim indemnity from the principal only upon actual proof of payment for there is no legal liability upon the agent to make payments in respect of wagering transactions.

Power of attorney executed to empower attorney to execute deed of relinquishment, etc. relating to properly---Deed of relinquishment executed by attorney---Subsequent cancellation of power of attorney does not nullify the deed.

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.

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

(b) A consigns provisions to B at Karachi with directions to send them immediately to C at Quetta. B may sell the provisions at Karachi if they will not bear the journey to Quetta without spoiling.

Illustrations (b) seems to be suggested by Story’s opinion that, "if goods are perishable and perishing, the agent may deviate from his instructions as to the time or price at which they are to be sold". Under this head comes the authority already referred to by which the matter of a ship may sell the goods of an absent owner in case of necessity when he is unable to communicate with the owner and obtain his directions. But the manager of a business which does not include borrowing money as part of its ordinary course has no implied authority to borrow money on his principal’s credit to carry on the business, even if the money is urgently needed. It has been said that ‘the authority of the master of a ship rests upon the peculiar character of his office and affords no analogy to the case of an ordinary agent'.

Manager of business concern---Not authorised to borrow money on credit of principal---Cannot borrow money in his name for the business. In the absence of proof to the contrary, a manager of a business which does not include borrowing of money as part of its ordinary course has no implied authority to borrow money on his principal's credit to carry on the business even if the money is urgently needed.

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.

For a similar rule in the case of trustees, see the Trusts Act, 1882, S. 47.

"One who has a bare power or authority from another to do an act must execute it himself and cannot delegate his authority to another". Thus the auctioneer at a sale by auction "is the agent of the purchaser as well as of the seller, and has authority to sign a memorandum of the sale so as to bind both parties"; but he cannot of his own motion delegate that authority to his clerk. The reason that no such power can be implied as an ordinary incident in the contract of agency is that confidence in the particular person employed is at the root of the contract. According, auctioneers, factors, directors of companies, brokers, and other agents in whom confidence is reposed have, generally speaking, no power to delegate their authority. But the exigencies of business do from time to time render necessary the carrying out of the instructions of a principal by a person other than the agent originally instructed for the purpose, and where that is the case, the reason of the thing requires that the rule should be relaxed. And an authority to the effect referred to may and should be implied where, from the conduct of the parties to the original contract of agency, the usage of trade, or the nature of the particular business which is the subject of the agency, it may be reasonably presumed that the parties to the contract originally intended that such authority should exist, or where, in the course of the employment, unforeseen emergencies arise which impose upon the agent the necessity of employing a substitute. So it is where a shipowner employs an agent for the purpose of effectuating a sale of a ship at any port where the ship may from time to time in the course of its employment under charter happen to be, for it is obvious that the agent cannot himself be prepared to do the business at every such port. Authority to delegate is implied whenever the act to be done by the sub-agent is purely ministerial, and does not involve the exercise of any discretion.

In some cases the custom of trade justifies the delegation of special branches of work. Thus it has been found to be a usage of trade for architects and builders to have the quantities taken out from their designs by surveyors, who are more expert in that work, for the purpose of enabling proper estimates to be made; and the surveyor can sue the architect's employer for his charges.

Principal and agent---Sale by agent---Delegation of power by agent to sub-agent---Effect---In absence of any specific stipulation in the. power-of-attorney to delegate power by the agent to sub-agent, a sale by such sub-agent of principal's property would be void---Agent, as a general rule could not lawfully employ another person to perform acts which he had expressly or impliedly undertaken to perform personally---Sub-agent, however, could be employed if it was the ordinary custom of trade or such action was justified from the nature of the act to be performed by the agent---Permissible for the agent to appoint a sub-agent in special circumstances.

Delegation of authority by agent to sub-agent cannot lawfully employ another person to perform acts which he has expressly or impliedly undertaken to perform personally---This principle is subject to rider that a sub-agent can be employed if it is ordinary custom of trade or action is justified from nature of act to be performed by agent---In special circumstances, it would be permissible for agent to appoint a sub-agent---Islamic Law also has same legal position about delegation of authority by agent to sub-agent.

Sale---Nullification of---Consideration for---Contention that sale deed could only by nullified if it was found collusive and without consideration and otherwise not---Learned Single Judge nullified sale as general power-of-attorney executed by other two respondents in favour of Qurban Ali, did not, admittedly contain any authorization to delegate power on their behalf---As a general rule, an agent cannot lawfully employ another person to perform acts which he has expressly or impliedly undertaken to perform personally---Held: Delegation of power of sale by Qurban Ali to Gulfam, was contrary to law and Gulfam could not transfer property to Saghir by virtue of power delegated to him---Hence sale was void---Appeals dismissed.

Principal and agent---Power of attorney---To be construed strictly---Attorney always a delegate of authority conferred on him---Delegate cannot delegate such powers unless specifically authorised to do so---Maxim: Delegatus non potest delegare (an agent cannot delegate his authority)---Sub-agent can, however, be appointed if permissible by ordinary custom of trade---Act of agent done without specific authority of principal---Held, not binding upon principal unless legalised by ratification by principal.

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.

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The relation of the sub-agent to the original agent is, as between themselves, that of agent to principal. It may be generally stated that, where agents employ sub-agents in the business of the agency, the latter are clothed with precisely the same rights, and incur precisely the same obligations, and are bound to the same duties, in regard to their immediate employers, as if they were the sole and real principals. In the three next following sections the Act has defined, in accordance with settled law, the relations of the ultimate principal to the sub-agent in different cases.

Agents not authorised to appoint agent for his principal---If can be appointed line---Such agent is agent's agent and not that of principal. The plaintiff appointed a Bank (A) as agent, which again appointed another Bank (B) its agent to perform the work. The second bank did not do it as advised.

Held: The Bank (B) was acting as an agent of the first Bank (A) and not as an agent of the plaintiff. The plaintiff could therefore sue bank (A) for the breach of contract.

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 to the principal, except in case of fraud or willful wrong.

Principal and sub-agent.----Where authority to appoint a sub-agent in the nature of a substitute for the first agent "exists" either by agreement or as implied in the nature of the business "and is duly exercised, privity of contract arises between the principal and the substitute, and the latter becomes as responsible to the former for the due discharge of the duties which his employment casts upon him, as if he had been appointed agent by the principal himself. This is the class of cases contemplated in S. 194. Otherwise the sub-agent looks to and is controlled by the agent who appointed hi, and is not under any contract with the principal. If money due to A is paid to P, who is Z’s servant, Z having authority from A to collect it, P is accountable only to Z, and A cannot recover the money direct from P. In Summan Singh v. National City Bank of New York, A had instructed the American bank to remit money to X, in Jullundur. The bank issued instructions to a Jullundur bank to pay the money to X, in Jullundur. There were in Jullundur two persons of the name of X, and the Jullundur bank paid the money to the wrong person. It was held that A could not recover the money from the Jullundur bank, as there was no privity of contract between them. It was further decided that A could not recover from the American bank in view of an exemption clause protecting the latter from liability, the Court holding that it was possible to contract out of S. 192, in reliance on the decisions that it is possible to contract out of S. 151. But a sub-agent is accountable to the principal for a secret commission improperly received by him.

And a sub-agent who does not know that his employer is an agent is entitled to the same rights as any other contracting party dealing with an undisclosed principal (see Ss. 231, 232). "If A employs B as his agent to make any contract for him, or to receive money for him, and B makes a contract with C, or employs C as his agent, if B is a person who would be reasonably supposed to be acting as a principal, and is not known or suspected by C to be acting as an agent for any one. A cannot make a demand against C without the latter being entitled to stand in the same position as if B had in fact been a principal. If A has allowed his agent B to appear in the character of a principal he must take the consequences."

Accordingly where goods consigned have been sold in good faith by a sub, agent appointed by the consignee, and the proceeds have been brought into account between the consignee and the sub-agent, the latter is not liable to account to the consignor. His account with the consignee cannot be interfered with by the consignee’s principal except on the ground of bad faith.

Agent's responsibility for sub-agent.---A commission agent for the Sale of goods, who properly employs a sub-agent for selling his principal’s goods, is liable to the principal for the sub-agent's fraudulent disposition of the goods within the course of his employment. The last clause of this section, giving a principal in cases of fraud or willful wrong the right of recourse to the sub-agent, does not exclude the principal's normal right of recourse to his agent. In fact, the total effect of the section is to give an option to the principal where a fraud or willful wrong is committed by the sub-agent. It has however, been held that an agent may exempt himself from liability for the negligence of a sub-agent by a special term in the contract.

Appointment of sub-agent---Agent must have express or implied authority from principal for such appointment---In absence of such authority, a person acting on agent's behalf cannot be treated as sub-agent---Agent cannot shed away liability to principal for loss occasioned to principal by negligence of person purporting to act as sub-agent---Held: Loss caused to principal in present case was not due to remote consequences of agent’s action and as such suit for recovery of such loss merited decretal---Judgment/decree of trial Court dismissing suit reversed and suit decreed after accepting plaintiff’s apeal.

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.

COMMENTS

If the sub-agent purports to act in the name of the ultimate principal, that principal may adopt his acts by ratification, as he might adopt acts purporting to be done on his behalf by any other person (Ss. 196-200, below). But it is conceived that, if a sub-agent acts in his own name or in that of the agent who has taken on himself without authority to delegate to him business which is in fact the principal's, the acts so done cannot be ratified by the principal.

A person to whom a trust has been improperly delegated is not an agent of the beneficiaries, but he is not the less liable to account to them, independently of agency, for trust property which has come to his hands.

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.

(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 authorises B, a merchant in Karachi, 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.

In such cases as are put in the illustrations B, as between A and the auctioneer or solicitor, is treated as merely the messenger of A's direct authority. This section apparently means to draw a clearly marked line between an ordinary sub-agent and a person who is. put in relation with the principal, a "substitute" as he is called in a passage already quoted above. The distinction is probably convenient, though we cannot find it so sharply defined in any English authority. Apparently this section covers the case of an upper servant in a household who has authority to select and dismiss under-servants, although the language is perhaps not the most appropriate. Such a servant, at any rate, is not answerable to third persons for acts or defaults of those under him which he has not specifically authorised.

A receiver appointed to carry on a business by mortgagees, trustees for debenture-holders, or the like, appears to be in a similar position, though it by no means follows that those who appoint him under the special powers conferred on them for that purpose, whether by law or by agreement of parties, are liable as principals for his acts. In Bombay, the appointment of a muccadam by a commission agent acting for an up-country constituent is an ordinary case of the appointment of a sub-agent. The muccadam is not a substituted agent of the up-country constituent.

The following section and this section, read together, show that they do not apply to the case of an agent being instructed to hand over all or part of the business to a certain named person and no other ; in such case he is not answerable for the capacity or conduct of that person; his duty is done when he has established relations between the substituted agent and the principal, and then Ss. 191, 192 have no place.

Principal knowing limitations of agent---Cannot hold agent responsible for what he knew the agent could not do. The principal is deemed to have full knowledge of the limitations of the agent and the principal cannot be heared to say that the agent had failed to do something which was within his power. Therefore, where the principal appointed a Bank to act as his agent for the purchase of foreign currency with full knowledge of the limitation of the Bank in the matter, he cannot later on refuse to pay on the ground that the Bank should have acted in a manner other than that in which it actually acted. It is to be noted that at the time the Bank could not have acted in the manner in which the plaintiff wanted it to act.

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.

(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.

Little, if any, authority can be produced for this rule. Were it otherwise, no man would lake the responsibility of choosing an agent for another without an express indemnity.

Although an agent is not responsible for the negligence of a substituted agent, he may revoke the power of the substituted agent in the interests of his principal.

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.

Conditions of ratification: "On behalf of another".---The rules on this subject are now familiar in the Common Law. Some of them are perhaps over-subtle, but on the whole they are for the advantage of commerce. Ratification must be by the person for whom the agent professes to act. That an act done for another by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal; if subsequently ratified by him, is the known and well-established rule of law. In that case the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be founded on a tort or a contract, to the same extent as by, and with all the consequences which follow from, the same act done by his previous authority. But where A does an act as agent for B without any communication with C, C cannot, by afterwards adopting that act, make A his
agent and thereby incur any liability, or take any benefit, under the act of A. Ratification in the proper sense of the term, as used with reference to the law of agency, is applicable only to acts done on behalf of the ratifier. And this rule is recognised in S. 196 of the Contract Act. Ratification can be express or implied from conduct.

A ratification of the unauthorised contract of an agent can only be effectual when the contract has been made by the agent avowedly for, or on account of, the principal, and not when it has been made on account of the agent himself.

A man cannot adopt by ratification an act which was not authorised by him at the time and did not purport to be done on behalf of any principal.

Since a ratification is in law equivalent to a previous authority, a person not competent to authorise an act cannot give it validity by ratifying it.

Ratification must be by an existing person on whose behalf the contract might have been made at the time. Thus a newly-formed company cannot ratify an act done in its name before it was incorporated. And where a time is limited for doing an act, and A does it on behalf of B, but without his authority, within that time, B can ratify it only before the time has expired.

The person on whose behalf an act purports to be done need not be individually known to the agent; it is enough if he is ascertainable as owner of specified property or the like. A man may effect an insurance on behalf of all persons interested, and any such person may adopt the contract of insurance for his own share by ratification. A bailiff may receive the rent of land on behalf of the unknown heirs of the last owner in possession, and those heirs, when their title is ascertained, can ratify his acts.

"Acts done without knowledge or authority"---An act done by an agent in excess of his authority may also be ratified. But there is a wide distinction between ratifying a particular act which has been done in excess of authority and conferring a general power to do similar acts in future. Therefore the ratification by a company of certain acts done by its directors in excess of the authority given to them by the articles of the company does not extend the authority of the directions so as to authorise them to do similar acts in future.

Retrospective effect.---Ratification, if effective al all, relates back to the date of the act ratified. If an action is brought in a man's name without his knowledge, he may adopt the proceedings and make them good at any time. The rule goes so far that if A makes an offer to B which Z accepts in B's name without authority, and B afterwards ratifies the acceptance, an attempted revocation of the offer by A in the time between Z's acceptance and B's ratification is inoperative. So long as the professed agent purports to act on behalf of the principal, it is immaterial whether in his own mind he intends the principal's benefit or not, and what his real motive and intention may be; nor does it make any difference if the third party discovers before ratification that the agent meant to keep the contract for himself. In fact, the third party gets by the ratification exactly what he bargained for.

But if Z pays money to B as in satisfaction of A’s debt, and B, afterwards discovering that Z had no authority, returns him the money by agreement between them. A can no longer adopt the payment and rely on it as a discharge. A man is not bound to accept payment of a debt, or satisfaction of any other obligation from a stranger to the contract, though, if B had accepted the payment with knowledge of Z's want of authority, or acquieseed in it after he obtained that knowledge, he would have been estopped from denying Z’s authority as against A.

It goes without saying that if an offer is accepted by an agent subject to ratification no contractual relationship with the principal comes into existence until ratification, and therefore up to that moment the offer can be withdrawn. It has been held that where a partner without authority to do so referred a dispute between a third party and the partnership to arbitration, and the other partners did not ratify the submission to arbitration, the award cannot be enforced even against the partner who so referred the dispute. It is submitted that the liability is joint and several, and the partner submitting the matter to arbitration is bound by the award.

What acts cannot be ratified.---A transaction which is void ab initio cannot be ratified. This is illustrated by a line of cases in company law marking the distinction between irregularities capable of being made goods if the act is ratified by a general meeting, or the whole body of shareholders, and acts not within the company's objects as defined by its original constitution, and therefore incapable of being made binding on the company by any ordinary means known to the law. A forged signature cannot be ratified; but a person whose signature has been forged may be estopped from denying that a signature is his, if for example, he has by his conduct induced the holder of a bill of cheque to alter his (the holder's) position.

Agents of Government.---Acts done by public servants in the name of the Crown, or the Government of India, may be ratified by subsequent approval in much the same way as private transactions.

Subsequent ratification carries retroactive efficacy---It amounts to a prior command of an act done in name of ratifying party.

Ratification would be effective though it is made subsequently---Ratification validates act already performed---It relates back to time of inception of transaction and carries a complete retrospective efficacy---Islamic Law as to ratification stated in judgment.

Principal---Ratification of acts by---Definite rule of ratification of acts of person by another person on whose behalf the acts laid down in S. 196 of Contract Act---Held: Principle of law enunciated in such section to equally apply to acts of attorney if ratified by principal.

Only the civil liability created by act of an agent acting for his principal ratified and not a criminal liability---Guarantee being a forged document---No ratification therefor permissible this being a criminal liability.

Principle of ratification of contract---Scope of---Acts done by one person on behalf of another without such person's knowledge or authority---Principal might ratify or disown acts done by agent on his behalf---Exception to such ratification was where right or interest of third person was involved---Agent having entered into transaction of exchange in favour of vendee, not having been specifically authorized to do so---Act of ratification by principal had effect of terminating right of pre-emption vested in pre-emption---Even if such exchange transaction was validated by principal, no benefit of exchange, held, could be extended to vendee.

Agent.---Act of---Ratification of---Person authorised by principal to act as his attorney or agent in respect of particular properly---Scope of such authority described in instrument---Held: Any incidental action to property of such attorney or agent to be binding on principal only when he accepts, acknowledges or undertakes by ratifying same---In absence of ratification of action constituting transgression of authority, principal not to be held responsible for such action of---Even unauthorised action of attorney in suit or proceeding when ratified by principal (also) to be upheld.

Agent bidding at auction for his principal without duly executed power of attorney---Principal ratifying act of agent---Auction is valid and effective. Where the agent who made a bid at an auction for his principal did not have a duly executed power of attorney as was required by the rules of auction and the transfer by such auction was therefore challenged. Held: If the principal is named and accepts the action of his agent, even though the same was not covered by a duly executed power of attorney at the time of the auction, the matter would be fully covered by the doctrine of ratification, as embodied in section 196 of the Contract Act, 1872.

Overdraft granted unauthorisedly by Manager of Bank---Bank charging interest on amount and suing on hypothecation---Act of agent stands ratified by conduct.

Servants, unauthorised acts of---May be ratified by Master.---These sections are not limited to acts of agents but they lay down general principles which are equally applicable to a servant who is generally his master's agent for some purpose, the extent of the agency depending on the duties and position of the servant.

Unauthorised act of agent when implied ratification by conduct is presumed---No ratification by conduct where acts are disapproved. To constitute implied ratification by conduct of acts previously unauthorised, the conduct of the principal must be such as to lead to the necessary inference that there was an unqualified and binding adoption of those acts by him. Where the Board categorically declined to approve of the alleged contract despite recommendations by the Managing Director, there can be no implied ratification by conduct of those acts.

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.

(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.

Express ratification.---An express ratification cannot become complete until it is communicated; till then it is liable to revocation.

Implied ratification.---An express ratification cannot become consent to an agreement, may be conveyed otherwise than in words; and taking the benefit of the transaction is the strongest, as it is the most usual, evidence of tacit adoption. Accepting the results of the agent's proceeding, whether obviously beneficial to the principal or not, will have the same effect. Where an agent, without authority to do so, referred certain matters to arbitration, and the principal, after knowledge of the arbitration proceedings, acquieseed in them and did not raise any objection thereto, it was held that his conduct amounted to a ratification of the reference.

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.

The Act does not expressly deal with the possible case of the principal deliberately waiving inquiry so as to make the agent's act his own at all hazards. Such cases fall under the general rule that a free agent may waive a legal advantage if he thinks fit.

Earnest money paid to defendant’s son on agreement to sell land---Cheque for earnest money cashed by defendant---Enough ratification of agreement. Where the agreement to sell was executed by the son of the defendant and the earnest money was paid by cheque which was cashed by him.

The fact that the cheque has been cashed by the defendant, the agreement to sell had been sufficiently ratified within the meaning of section 198, Contract Act.

199. Effect of ratifying unauthorised act forming part of a transaction.---A person ratifying any unauthorised act done on his behalf ratifies the whole of the transaction of which such act formed a part.

It is obvious that a man cannot at his own choice ratify part of a transaction and repudiate the rest. The only possible exception is in the case of the part repudiated being wholly for the principal's benefit, which is not likely to occur. The general rule is that, where a ratification is established as to a part, it operates as a confirmation of the whole of that particular transaction of the agent.

200. Ratification of unauthorised 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.

(a) A not being authorised 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 unauthorised person, gives notice of termination to A. The notice cannot be ratified by B, so as to be binding on A.

This is the converse of the principal that a voidable transaction cannot be rescinded to the prejudice of third persons' right acquired under it in good faith. Rights of property cannot be changed retrospectively by ratification of an act inoperative at the time. The rule is also stated in the form that ratification, to make an act rightful which otherwise would be wrongful, must be at a time when the principal could still have lawfully done it himself. The ratification of contract does not give the principal a right to sue for a breach committed prior to the ratification. A holds a lease from two joint receivers, B and C. B without C's authority, gives notice to quit to A. The notice cannot be ratified by C so as to be binding on A.

Punjab pre-emption Act. (I of 1913) S. 15---Pre-emption suit---Power of attorney---Ratification---A ratification is incapable of terminating the right or interest of a third person and if the institution of suit of pre-emption is taken to. have been validated by ratification made by principal then, in the event of its ultimate success, right and interest of the vendee-defendant would come to be terminated on account only of this ratification---Act of signing amended plaint by principal may, if at all, operate as his own act, not referable to the attorney, from that date onwards but when the limitation for filing suit had long since expired, said act of signing amended plaint would only be unavailing to the appellant.

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.

COMMENTS

The present section has, in any case, made the law clear. We have to read it with the following ones to 210 inclusive, which modify its effect in various ways.

Completion of business of agency.---The Allahabad and Calcutta High Courts hold that where an agent for the sale of goods receives the price, the agency does not terminate on the sale of the goods, but continues until payment of the price to the principal. S. 218 (below) provides "that an agent is bound to pay to his principal all sums received on his account. Clearly then the business does not terminate on receipts of the money by the agent, inasmuch as there is a subsequent obligation to account for the sums and to pay them. In a Madras case, Wallis C.J. expressed the opinion that the agency terminates when the sale is completed, and that it does not continue until payment of the price. The question in the above cases was one of limitation. But the authority of an agent for sale to contract on the principal's behalf ceases as soon as the sale is completed. He has no power to alter the terms of the contract without fresh authority from the principal.

The authority of an agent to collect bills and to remit the amount, when realised, by drafts, terminates as soon as the drafts are despatched. Where a duly appointed guardian of a minor litigant has duly appointed a lawyer, his agency is not terminated on the attainment of majority by the minor, unless he expressly revokes the authority.

Death of principal.---A power of attorney to an agent to present a document for registration is revoked by the death of the principal. It was accordingly held by the Privy Council that where the principal died before the presentation; and the registrar, knowing of the principal's death, accepted and registered the document, the registration was invalid. Where a power of attorney is given by the members of a joint Hindu family to one of them in connection with the family business, it is a question of construction in each case whether the power comes to an end on the death of any of them or whether it is to continue even after then.

Where the agency is for a fixed term.---"Where an agent has been appointed for a fixed term, the expiration of the term puts an end to the agency, whether the purpose of the agency has been accomplished or not; consequently where an agency for sale has expired by express limitation, a subsequent execution thereof is invalid, unless the term has been extended.

Dissolution of firm.---The section, it has been held, is not exhaustive of the circumstances in which an agency is determined, and it has been held that a power of attorney, executed by a firm, to sell immovable property is terminated by the dissolution of the firm.

Payment or act by attorney under power.---S. 3 of the Powers-of-Attorney Act, 1882 provides that any person making or doing any payment or act in good faith, in pursuance of a power of attorney, shall not be liable in respect of the payment or act by reason that, before the payment or act, the donor of the power had died or become lunatic or insolvent, or had revoked the power, if the fact of the death, etc., was not at the time of the payment or act known to the person making or doing the same.

Agent---Termination of authority of---Effect of---Held: No agent or attorney to be authorised to continue to represent and deal with third parties for and on behalf of principal after withdrawal of authority by principal or termination of power by grantor.

Notice of termination of contract---Memorandum of agreement providing notice before termination---Where contract was intended to be terminated much before the terminal date, notice was proper and provisions of S. 205 would be attracted if termination was without sufficient cause---Sufficient cause, however, differed from case to case.

Contract of agency contemplating supply of goods by principal to agent---Goods not supplied---Agent may claim damages. Where there is a contract of agency which contemplates that the agent will be supplied with goods for sale by the principal, and the principal does not supply any goods, the agent can claim damages for breach of the agency.

202. Termination 6f 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.

(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 matte 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.

Authority couple with interest.---In these cases the current phrase is that the agent’s authority is "coupled with an interest."

Authorities.---The interest which an agent has in effecting a sale and the prospect of remuneration to arise therefrom do not constitute such an interest as would prevent the termination of the agency. Upon the same principle, where an agent is appointed to collect rents, and his salary is agreed to be paid out of those rents, it does not give the agent an interest in the subject-matter of the agency within the meaning of this section. But where an agent is authorised to recover a sum of money due to a third party to the principal, and to pay himself, out of the amount so recovered, the debts due to him from the principal, the agent has an interest in the subject-matter of the agency, and the authority cannot be revoked. A member of a tarwad who is entitled to be maintained out of the tarwad property and is appointed an agent to collect the rents has an interest in the subject-matter of the agency, and his authority cannot be revoked. A vendee retaining part of the price to pay off incumbrances is an agent of the vendor with an interest.

Factors for sale of goods.---The question has often arisen as to whether a factor who has made advances as against goods consigned to him for sale has such an interest in the goods consigned as to prevent the termination of his authority to sell. The result of the cases appears to be that the authority of a factor to sell is in its nature revocable, and the mere fact that advances have been made by him, whether at the time of his employment as such or subsequently, cannot have the effect of altering the revocable nature of the authority to sell, unless there is an agreement express or implied between the parties that the authority shall not be revoked. Where the factor is expressly authorised to repay himself the advances out of the sale proceeds, as in illustration (b), he has an interest in the goods consigned to him for sale, and the authority to sell cannot be revoked. In such a case "an interest in the property" is expressly created. But the "interest" need not be so created, and it is enough to prevent the termination of the agency that the "interest" could be inferred from the language of the document and from the course of dealings between the parties. Thus where a factor who had made advances as against goods consigned to him for sale was authorised to sell them "at the best price obtainable." and in the event of a shortfall to draw on the consignor, it was held that this arrangement gave an interest to the factor in the goods, and that the authority to sell could not be revoked.

Termination of agency---Properly subject matter of agency---Agent should have an interest in such properly---Agency cannot be terminated to prejudice such interest in absence of express contract.

Agent having interest in subject-matter---Termination of agency of---Licensee and agents allured to commit their capital on assurance and guarantees of licensors and principal---Held: Such being cases of agency with interest and license coupled with grant licensee or agent not to be chucked of on whims of their counter parts.

Interest in properly, and authority to file or continue proceedings---Not the same thing---Distinction.---Section 202 cannot be read to confuse the interest in property, with the authority to file or continue proceedings. That authority is totally independent of the interest claimed by the petitioner in the property which is the subject-matter of the proceedings; and section 202 is not attracted to such an authority to protect it from being terminated on account of the death of the agent.

Held, existence of applicant's interest in land which formed subject-matter of power-of-attorney within meaning of S. 202 can hardly be denied when facts show that he had interest at time power-of-attorney was executed in his favour---Held further, it cannot be legitimately maintained that agreement executed by respondent before execution of power-of-attorney cannot be looked into in present proceedings of such collateral purposes.

203. When principal may revoke agent's authority.---The principal may, save as in 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.

What amounts to exercise of authority.---An agent authorised to purchase goods on behalf of his principal cannot be said to have exercised the authority so given to him "so as to bind the principal" if he merely appropriates to the principal a contract previously entered into by himself with a third party. Such an appropriation does not create a contractual relation with a third party, and the principal, therefore, may revoke the authority.

Authority given to an auctioneer to sell goods by auction may be revoked at any time before the goods arc knocked down to a purchaser, and authority given to a policy broker to effect a policy at any time before the policy is executed so as to be legally binding. Authority to pay money in respect of an unlawful transaction may be revoked at any time before it has actually been paid, even if it has been credited in account.

Agency revoked by principal before expiry of period of agency---When agent may recover damages from principal. If the principal without sufficient cause revokes the agency before the expiration of the period mentioned in the contract he must make compensation to the agent. Furthermore, unless reasonable notice is given of such revocation, the principal must make good the damage resulting to the agent. But damage could not be recovered as a matter of course. It was only where such termination was without ‘sufficient cause’ that damages could be recovered. The circumstances of each case would determine the question whether there was sufficient cause.

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.

(a) A authorises B to buy 1,000 bales of cotton on account of A, and to pay for it out of A's money 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 authorises 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.

Authority partly exercised.---The rule here laid down is connected with the principal's duly to indemnify the agent (S. 222, below). if a principal employs an agent to do something which by law involves the agent in a legal liability or even in a customary liability by reason of usage in that class of transactions known to both agent and principal, the principal cannot draw back and leave the agent to bear the liability at his own expense. If a principal revokes his agent's authority to carry on an enterprise, and the agent nevertheless carries it on and contrary to expectations makes a profit, the principal cannot then ignore his own revocation and claim the profit.

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, of the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.

Compensation for revocation.---By this section "the principal is bound to make compensation to the agent whenever there is an express or implied contract that the agency shall be continued for any period of time. This would probably always be the case when a valuable consideration had been given by the agent.

The valuable consideration here spoken of must be something more than undertaking the agency. Where A appointed B as exclusive agent for the sale of A’s coal in Liverpool for seven years, and B undertook not to sell any other owner’s coal there during that time without A’s consent, this was decided by the House of Lords not to imply any condition that A should continue to keep his colliery during the term. Upon such an agreement as that...., unless there is some special term in the contract that the principal shall continue to carry on business, it cannot for a moment be implied as matter of obligation on his part that, whether the business is a profitable one or not, and whether for his own sake he wishes to carry it on or not, he shall be bound to carry it on for the benefit of the agent and the commission that he may receive.

There is a class of cases in which an agent for sale, having proceeded far enough in the transaction to be entitled to commission on its completion, has been deprived of his commission by the principal putting an end to the whole matter. But these cases do not depend on the rule here laid down, or on any rule peculiar to the law of agency. They are examples of the rule that one party to a contract must not prevent another from performing his part (Ss. 53, 67, above), or each party is entitled to the full benefit of his contract without hindrance from the other.

Specific Relief Act (I of 1877), S. 56---Agency contract---Termination of agency---Suit for declaration and perpetual injunction---Three months’ notice required under agreement allegedly not given---Held, even if such notice was not given and even if there was unlawful termination of dealership agreement, plaintiff could only ask for damages and not for declaration and permanent injunction---Such agreement could not be specifically enforced---Suit, held, was neither maintainable under Ss. 205 & 206 of Contract Act, 1872 nor under any other rule of law.

Agency given for specific period---Cancellation of agency prior to that date---Suit for damages by agent competent.---A distinction must be kept in mind between the principal’s power to revoke an agency and his right to revoke the same. Although he has the power to revoke the authority of an agent, he will not have the right to do so in a case in which he has agreed to appoint a particular person for a certain period. The authority of an agent, therefore, may be withdrawn at any moment, but the contract of agency cannot be terminated in violation of its terms without making the principal liable for damages. A promise of indemnity is an implied term of such a contract of agency. The remedy of the respondent, therefore, for the improper revocation is under section 205 of the Contract Act and the appellants are bound to make compensation to the respondent, and particular for the reason that he had furnished valuable consideration invoking financial obligations.

Loss of reputation of agent---Sufficient ground for termination of agency by principal---Matter may be considered while assessing damages payable to agent.---Loss of reputation by the agent could be considered to be sufficient reason for putting an end to agency on the part of the principal. Where there was some loss of reputation of the agent on account of the action of Police in seizing of his goods and sealing of his premises on the charge that he was dealing in smuggled goods, but the principal while terminating his agency had not mentioned this fact in his letter withdrawing the agency, it was held that the loss of reputation, in the circumstances, may not be relied upon as furnishing sufficient cause for the withdrawal yet it could be taken into consideration for the purpose of assessing the measure of damages.

Termination of agency---How damages may be calculated----Damages may be awarded even when no actual damages are proved.---It is not always necessary that actual damage should be proved in order that damages may be awarded. In actions, for breach of contract nominal damages are recoverable although no actual damage recoverable although no actual damage can be proved. Compensation is payable for the actual loss as damage caused; the loss or damage must be the proximate result of the breach, and foreseeable by the defendant. In estimating the loss or damage, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

206. Notice of revocation of 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.

An authority given by two or more principals jointly may be determined by notice of revocation or renunciation being given by or to any one of the principals. If the authority is joint and several, revocation by one principal will only determine the authority which the himself has given.

Where an insurance agent had acted as agent for a long period of time and had to maintain a large staff of canvassers, it was held by the Privy Council that three and a half months’ notice was not reasonable; their lordships expressed the opinion that in the circumstances two years’ notice would not have been unreasonable.

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.

A empowers B to led A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority.

COMMENTS

With reference to the illustration to the section, A could let the house himself or through an agent other than B without incurring and liability to remunerate B, unless A had specifically agreed to the contrary.