Ce diaporama a bien été signalé.
Le téléchargement de votre SlideShare est en cours. ×

legal aspect unit 1b.pptx

Prochain SlideShare
Performance of contract
Performance of contract
Chargement dans…3

Consultez-les par la suite

1 sur 101 Publicité

Plus De Contenu Connexe

Similaire à legal aspect unit 1b.pptx (20)

Plus récents (20)


legal aspect unit 1b.pptx

  1. 1. Performance and Discharge of Contract
  2. 2. Performance of a Contract Defined The term ‘performance of contract’ means that both the promisor and the promisee have fulfilled their respective obligations, which the contract placed upon them. For instance, A visits a stationery shop to buy a calculator. The shopkeeper delivers the calculator and A pays the price. The contract is said to have been discharged by mutual performance.
  3. 3. Promises bind the representatives of the promisor in case of the death ofthe latter before performance, unless a contrary intention appears in the contract.
  4. 4. Types of Performance • Actual Performance When a promisor to a contract has fulfilled his obligation in accordance with the terms of the contract, the promise is said to have been actually performed. For example, A agrees to deliver 10 bags of cement at B’s factory and B promises to pay the price on delivery. A delivers the cement on the due date and B makes the payment. This is actual performance.
  5. 5. • Substantial performance W here the work agreed upon is almost finished. The court then may order that the money must be paid, but deducts the amount needed to correct minor existing defect.
  6. 6. This is where one of the parties has performed the contract, but not completely, and the other side has shown willingness to accept the part performed. Partial performance may occur where there is shortfall on delivery of goods or where a service is not fully carried out. Partial performance
  7. 7. • Attempted Performance When the performance has become due, it is sometimes sufficient if thepromisor offers to perform his obligation under the contract. This offer is known as attempted performance or more commonly as tender.
  8. 8. By Whom Can a Contract Be Performed? • Promisor • Agent • Legal representative • Third person • Joint promisors
  9. 9. Discharge of a Contract Discharge of a contract implies termination of contractual obligations. Thisis because when the parties originally entered into the contract, the rightsand duties in terms of contractual obligations were set up.
  10. 10. A contract is deemed to be discharged, that is, concluded, and no longerbinding, in the following circumstances. 1. Performance : Where both the parties have either carried out or tendered (attempted) tocarry out their obligations under the contract, it is referred to as discharge of the contract by performance. 2. Agreement : Discharge by substituted agreement arises when a contract is abandoned, or the terms within it are altered, and both the parties are in conformity over it. 3. Lapse of time : A contract stands discharged if not enforced within a specified time calledthe ‘period of limitation’
  11. 11. 4. Impossibility of performance : The performance of a contractual obligation may become subsequently impossible on a number of grounds like Objective impossibility of performance , Commercial impracticability , 5. Operation of law : Unauthorized material alteration of a written document , insolvency, merger 6. Accord and satisfaction: To discharge a contract by accord and satisfaction, the parties must agree to accept performance that is different from the performance originally promised. 7. Breach: The breach may give to the aggrieved party the right to terminate the contract, but it is for the non-breaching side to decide whether or not to exercise that option.
  12. 12. Caselets 1. On 14 May 2007, P entered into a contract to purchase a motor vehicle from D, an auto dealer, and paid `10,000 as down payment. P informed D that he intended to use the vehicle for camping during the summer. The vehicle was supposed to be delivered during June, but no delivery was made through August. P seeks to cancel the contract and to obtain a refund of the `10,000. Will he succeed? 2. A flat was to be decorated and furnished for `50,000. When the work was over, the customer only paid `26,000 by installments. Then, because of defects to a bookcase and a wardrobe that would cost about 15,000 to put right, he refused to pay the remaining sum of `24,000. Decide.
  13. 13. Remedies for breach of Contract
  14. 14. Once a party fails to perform or performs inadequately, the other party—the non-breaching party—can choose one or more of several remedies. The most common remedies available to an aggrieved party are rescission, damages, specific performance, injunction, and quantum meruit.
  15. 15. • Rescission Rescission is the revocation of a contract. Section 39 of the Contract Act provides that when a party to a contract has refused to perform, or disabled itself from performing in its entirety, the promisee may put an end to the contract.
  16. 16. For example, A promises to supply a PC for B’s office on a certain date on cash-on-delivery (COD) basis. However, A fails to deliver the computer on the agreed date. B is absolved of the liability of paying the price and entitled to rescind the contract.
  17. 17.  Damages A breach of contract also entitles the non-breaching or injured party to suefor monetary damages besides rescinding the contract. Damages are designed to compensate the aggrieved party for the loss sustained in thebargain
  18. 18. • Specific Performance Where damages represent inadequate or unjust remedy,for example, where the subject matter of the contract is unique or wherethere are no standards to ascertain the quantum of loss, the non-breachingparty may approach the court for the grant of an order for specific performance of the contract.
  19. 19. • Injunction An injunction is an equitable remedy and, therefore, only granted at the discretion of the court. It is awarded in circumstances in which damages would not be an adequate remedy to compensate the claimant.
  20. 20. Injunction orders are of two types—prohibitory and mandatory. Prohibitory injunction This orders the defendant to restrain from committing a breach of a negative contractual obligation, i.e., where he/she does something, which he/she had promised not to do. For instance, G agreed to source all the electric power required forhis house from M but started buying part of his requirement from some other company. He was restrained by an injunction order from buying electricity from the other source. Mandatory injunction This, on the other hand, compels the performance ofa positive contractual obligation, for example, compelling an employee to do any work or attend at any place in order to do any work.
  21. 21. Quantum Meruit Quantum meruit is a Latin term meaning, ‘as much as is merited’ or ‘as much as earned’. In the context of contract law, it means something along the lines of ‘reasonable value of services rendered’
  22. 22. The concept of quantum meruit applies to the following situations: 1. When a person employs (impliedly or expressly) another person to do work for him, without any agreement as to his compensation, the law implies a promise from the employer to the workman that he will pay for the services, as much as the workman may deserve or merit. 2. When there is an express contract for a stipulated amount and mode of compensation for services, the plaintiff cannot abandon the contract and resort to an action for a quantum meruit.
  23. 23. 3. If a contract is divisible and a party to a contract is prevented from fulfilling its contractual obligations by the other party, then obviously he will not be in default. 4. If an indivisible contract is completely executed, but badly, the person who has performed will be entitled to a lump sum less deduction to overcome the defect in the perormance.
  24. 24. Quasi-contractual Relationships: Other Remedies • If a person incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapableperson . • Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered
  25. 25.  A person who finds goods belongingto another and takes them into his custody is subject to the same responsibility as a bailee .  A person to whom money has been paid or anything delivered by mistake or under coercion must repay for or return it
  26. 26. Special Contracts • Contract of Indemnity • Contract of Guarantee • Contract of bailment • Contract of Pledge • Contract of agency
  27. 27. Contract of Indemnity Section 124 defines the term ‘contract of indemnity’ as A contract, by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity’
  28. 28. Essentials of a Valid Contract of Indemnity 1. The indemnifier promises to make good the loss or to compensate the party (indemnified) who has suffered some loss due to the conduct of the promisor or any other person acting on its behalf, or specified by it. In its wider sense, a contract of indemnity also includes a promise of indemnity against loss arising from any causewhatsoever, for example, fire, accident, or natural calamity. 2. A contract of indemnity is primarily a contingent contract. The liability of the indemnifier arises only at the occurrence of the contingency, i.e., when the indemnity-holder suffers a loss.
  29. 29. 3. The liability of an indemnifier commences as soon as the liability of the indemnity holder to pay becomes clear and certain, although he has himself not paid anything.
  30. 30. Rights of an Indemnity Holder • The indemnity holder is entitled to all damages plus all costs of the suit and promised money provided he/she has acted intra-vires (within powers). • Besides, if he (indemnity holder) has incurred a liability and that liability is absolute, he has the right to require the indemnifier to put him/herin a position to meet the claim
  31. 31. Section 126 of the Indian Contract Act defines a contract of guarantee as : ‘A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default.’ Contract of Guarantee
  32. 32. • A contract of guarantee is a collateral engagement in which the surety undertakes to be liable to the creditor for the debt of another (i.e., the principal debtor) in case of his default. • The person who gives the guarantee is called the surety, the person in respect of whose default the guarantee is given is called the principal debtor, and the person to whom the guarantee is given is called the creditor. • Aguarantee may be either oral or written [Section 126].
  33. 33. For instance, A applies for shares in a public limited company and B assures the company that if A does not pay the calls, B will. This is a contract of guarantee. The primary liability to pay the calls made by the company is that of A, but if he fails to pay, B will become liable to pay. In this example, B is the surety, A is the principal debtor, and the company is the creditor.
  34. 34. Consideration for Guarantee There need not be any direct consideration X between the surety and the creditor. Consideration received by the principal debtor is sufficient for the surety. Section 127 expressly provides to this effect, saying, ‘anything done or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.
  35. 35. Incapacity of the Principal Debtor It is true that the parties to a contract of guarantee should be competent to contract. However, the incapacity of the principal debtor does not impair the validity of a contract of guarantee. A principal debtor may be a minor; in such a situation, the surety would be regarded as the principal debtor and he/she will personally become liable to pay. In that case, the contract between the creditor and the surety is treated as a primary and independent one, and not collateral.
  36. 36. Extent of Surety’s Liability The liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract [Section 128]. For instance, A guarantees to B the payment of a bill of exchange by C, the acceptor. C dishonours the bill. A is liable not only for the amount of the bill, but also for any interest and charges that may have become due on it. If A gives the guarantee for the principal amount of the bill, and if B makes a default, A shall be liable only for the principal amount, asthe bill bears.
  37. 37. Kinds of Guarantee • Specific Guarantee When a guarantee is given only for a single debt or a specific transactiononly, it is called specific guarantee. For example, A, a money lender, agrees to give a loan of `10,000 to B, under the contract that if B does not repay the loan, his friend C would repay the same. This is a contract of specific guarantee and C’s liability would come to an end as soon as Brepays the debt that he had guaranteed.
  38. 38. Continuing Guarantee A guarantee that extends to a series of transactions is called a continuing guarantee [Section 129]. Under this kind of guarantee, the surety undertakes responsibility for a series of separable and distinct transactions over a periodof time. For instance, a fidelity guarantee, in which the insurer providescover for a business against theft by an employee, is a continuing guarantee,as it remains in force for a period of time.
  39. 39. Rights of Surety 1. Rights against the principal debtor 2. Rights against the creditor 3. Rights against the co-sureties.
  40. 40. Rights Against the Principal Debtor • Right of subrogation After discharging the debt, the surety steps into the shoes of the creditor, i.e., subrogated to all the rights of the creditor againstthe principal debtor. • Right of indemnity A surety is entitled to be indemnified by the principal debtor for whatever sum he has rightfully paid under the guarantee.
  41. 41. Rights Against the Creditor • Right to security A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of surety is entered into, even if the surety is unaware of the existence of the security, • Right of set-off When the creditor calls upon the surety to pay the guaranteed amount, the surety is entitled to plead any set- off which the principal debtor may have against the creditor. He can claim such a right not only against the creditor but also against third parties who have derived their title from the creditor.
  42. 42. Rights against the co-sureties Where more than one person has guaranteed a single debt, they are called co-sureties. In such cases, the liability of co- sureties becomes joint and several. They are liable to contribute, as agreed, towards the payment of guaranteed debt. But in the absence of any agreement, if one of the sureties has paid the entire debt to the creditor, he has a right to have contribution from the co-sureties who are equally bound.
  43. 43. Discharge of Surety 1. By notice of revocation 2. By death of surety 3. By novation 4. By variance in terms of contract 5. By release or discharge of principal debtor 6. By arrangement between the principal debtor and the creditor 7. By impairing surety’s remedy 8. By loss of security 9. By invalidation of the contract.
  44. 44. • Notice of Revocation Ordinarily a guarantee cannot be revoked if the liability has already been accrued. But Section 130 provides for revocation of continuing guarantee. For example, if A has stood surety for a `5,00,000 home loan of B from a bank and the money has been disbursed, then A cannot revoke the guarantee, as the liability has accrued. • Death of Surety In case of a continuing guarantee, the death of the surety, in the absence of any contract to the contrary, discharges him from liability as regards future transactions (i.e., transactions after his death).
  45. 45. • Novation If the parties to a contract (of guarantee) agree to substitute it with a new contract, the original contract need not be performed and so the surety stands discharged with regard to the old contract. • Variance in Terms of Contract Any variance or alteration in the terms of the contract made between the principal debtor and the creditor, without the surety’s consent, discharges the surety as to the transactions taking place subsequent to the variance [Section 133].
  46. 46. Release or Discharge of Principal Debtor • Arrangement Between Principal Debtor and Creditor Where the creditor, without the consent of the surety, arrives at a settlement with the principal debtor, or promises to give him more time, or promises not to sue him by a contract between the creditor and the principal debtor, the surety is absolved from the liability, unless the surety assents to such contract. • Impairing Surety’s Remedy If the creditor commits any act, which is inconsistent with the rights of the surety, or fails to perform any act that his duty to the surety requires him to do, such that the eventual remedy of the surety himself against the principal debtor is impaired- the surety is discharged from his liability.
  47. 47. • Loss of Security If the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security. • Invalidation of Contract A surety is also discharged upon invalidation of the contract (i.e., betweenthe creditor and the surety).
  48. 48. Contracts of Bailment Section 148 defines the term ‘bailment’ as : A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them’
  49. 49. Essentials of Bailment • Bailment is based on a contract between two persons, namely, the bailor and the bailee. • Goods form the subject matter of the bailment. • Delivery of goods is the essence of bailment. • Delivery of goods may be actual or constructive. • Bailment signifies change of possession of goods from one person to another. But there is no change in the ownership. • The bailor delivers his goods to the bailee for some definite purpose. • Every bailment pre-supposes a condition that the goods bailed would be returned to the bailor,
  50. 50. Kinds of Bailment • Gratuitous bailment A bailment with no consideration is called a gratuitous bailment. In this kindof bailment, neither the bailor nor the bailee is entitled to any remunerationor reward. • Non-gratuitous bailment Contrary to gratuitous bailment, a non-gratuitous bailment or bailment for reward is one that involves some consideration passing between the bailorand the bailee. For example, A hires B’s car. Here B is the bailor and receives the hire charges, and A is the bailee and enjoys theuse of the car.
  51. 51. Duties and Rights of the Bailor Duties of the bailor • Duty to disclose faults • Duty to repay bailee’s expenses • Duty to indemnify the bailee • Duty to compensate bailee for breach of warranty • Duty to claim back the goods
  52. 52. Rights of the bailor • Right to enforce bailee’s performance • Right to claim damages • Right to claim compensation against unauthorised use of goods • Right to terminate the contract • Right to demand return of goods along with accretion to, if any
  53. 53. Duties and Rights of Bailee Duties of the bailee • Duty to take reasonable care of the goods whilst they are in his possession • Duty not to make any unauthorised use of the goods bailed • Duty not to mix the goods bailed with his own goods • Duty to return the goods in accordance with the contract • Duty to return any accretion to the goods
  54. 54. Rights of the bailee • Right to enforce bailor’s duties • Right of Lien • Right to sell the goods • Right to return the goods to any of the joint-bailors • Right to deliver goods to the bailor without title
  55. 55. Termination of a Bailment • Unauthorised use of goods bailed • Expiry of term of bailment • Accomplishment of purpose • Death of either party • Destruction of subject matter
  56. 56. Finder of Lost Goods The finder of goods occupies the positionof bailee only against the true owner, since he keeps the goods found in trust only for the real owner.
  57. 57. Duties and Rights of Finder of Lost Goods 1. To exercise reasonable care in preserving the goods found 2. To find the actual owner and restore the goods to him 3. Not to make any personal use of the goods found 4. Not to mix the goods found with his own goods 5. Not to set up any adverse title to the goods found
  58. 58. The law confers the following rights on a finder of goods. • Retain the goods • Sue the owner for reward • Sell the found articles
  59. 59. Pledge A pledge or pawn is a kind of bailment. It is the bailment of a movable thing as security for the repayment of a debt or performance of a promise. The bailor in this case is called the Pawnor or Pledgor, whereas the bailee is called the Pawnee or Pledgee [Section 172].
  60. 60. Pledge and Bailment Compared The contracts of pledge and bailment are similar in two of the following respects 1. In both the cases, there is a delivery of movable goods or property; 2. The goods are delivered back to the bailor or pawnor afteraccomplishment of purpose or expiry of stipulated time.
  61. 61. Pledge vs Bailment Purpose Pledge has a specific purpose, i.e., repayment of a debt or performance of a promise, whereas bailment has a general purpose. Use of goods The pawnee has no right to make any use of the goods pledged. On the other hand, in bailment the bailee uses the goods if the terms of bailment so provide.
  62. 62. Rights of pawnee • Right of retaining goods • Right as to extraordinary expenses • Right to sue when pawnor makes default • Right to sale • Right to have good title to the goods
  63. 63. Duties of pawnee 1. Duty to take reasonable care of the goods pledged 2. Duty not to make personal use of the goods pledged 3. Duty not to mix goods pledged with his own goods 4. Duty to return the goods pledged after the debt has been paid or the promise has been performed 5. Duty not to commit any act that is inconsistent with the terms of pledge 6. Duty to deliver accretion, if any, to the goods pledged.
  64. 64. Rights and Duties of the Pawnor Rights of pawnor The pawnor has a right to get back the goods pledged plus increase thereon, if any, by him, after paying off the amount of debt in full and other charges (if applicable), or performing the promise. Duties of pawnor • Duty to repay the debt or perform the promise • Duty to disclose defects in the goods pledged • Duty to meet extraordinary expenses
  65. 65. According to Section 182 of the Contract Act, ‘an agent is a person employed to do any act for another person, or to represent another inhis dealings with third persons. The person for whom such an act is done or who is so represented is called the principal’. Contract of Agency
  66. 66. General Rules Governing an Agency • Whatever a person competent to contract may lawfully do by himself, he may do the same through an agent. • The process cannot be adopted in the transactions or acts requiring personal skills and abilities. • Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person
  67. 67. Essentials of Agency • Intention and power to act on behalf of the principal A person must be intended and adequately authorised to represent another so that he/she can render the person so represented answerable to a third person. • Capacity of the parties it is essential that both the principal and the third party should be competent to contract. • Consideration not necessary Section 105 clearly provides, ‘No consideration is necessary to create an agency’
  68. 68. Creation of Agency The law recognises various modes to create a contract of agency, namely, 1. Agency by express agreement 2. Agency by implied agreement 3. Agency by ratification 4. Agency by operation of law.
  69. 69. • Agency by express agreement A contract of agency may be made through an express agreement between a principal and his/her alleged agent. The said agreement may be oral or in writing. The agency so created is called ‘express agency’. The usual form of a written contract of agency is the ‘Power of Attorney’, which gives the agent the authority to act on behalf ofthe principal in accordance with the terms and conditions therein.
  70. 70. Agency by implied agreement A contract of agency may be implied from the circumstances of the case, things spoken or written, or the ordinary course of dealing
  71. 71. An implied agency may take the following three distinct forms: 1. Agency by estoppel 2. Agency by holding out 3. Agency by Necessity.
  72. 72. Agency by estoppel Section 237, which deals with agency by estoppel, states, ‘When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority’.
  73. 73. For example A tells B in presence and within hearing distance of P that he is P’s agent. P does not contradict the statement. Later on B enters into a contract with A, honestly presuming that A is P’s agent. P will be bound by this contract for there is an agency by estoppel between him and A.
  74. 74. Agency by holding out The alleged principal by his/her words or conduct wilfully leads another person to believe that the alleged agent is representing him/her. If someone enters into a contract with the person so representing on that belief, then the person so represented (i.e., the alleged principal) is stopped from denying the truth of such statements subsequently. In this way, agency, by holding out is a type of agency by estoppel, where the agency by estoppel is created by the actions of the agent, the agency by holding out comes into existence by the actions of the principal.
  75. 75. For example, P allows his servant to purchase certain goods from B’s shop on credit and later on he pays for the goods. It is repeated many times. Later on, when the servant was not in P’s employment, he purchased goods on P’s credit from the same shop and disappeared. B can recover the price from P on the basis of the doctrine of holding out.
  76. 76. Agency by necessity Sometimes, owing to the exigencies of circumstances,a person may be compelled to act as an agent to the other without requiringor seeking the consent of the latter. Such an agency is called the agency by necessity. For example, a shipmaster can borrow money at a port where the shipping company has no agent, to get the ship repaired or fuelled so as to complete the voyage. In this case, the shipmaster becomes an agent by necessity.
  77. 77. Agency by ratification Where a person without being authorised, purports to act as agent, or a duly authorised agent acts beyond his/her authority, the principal may elect to ratify or disown such acts. If he chooses to ratify the agent’s transactions supposedly based on his behalf, an agency by ratification arises. The effect of ratification is that it renders the ratifier (i.e., the principal) bound to the contract as if he had expressly authorised the person to transact the businesson his behalf.
  78. 78. Rules governing agency by ratification 1. An act will be regarded as a ratification only if the principal had a free choice whether to do it or not. 2. The agent must purport (intend to seem) to act as an agent 3. The person ratifying must have contractual capacity [Section 196]. 4. Ratification may be express or it may be implied in the conduct of the person on whose behalf the acts are done [Section 196]. 5. The principal must exist when the act is done [Section 196]. Hence, a company cannot ratify pre-incorporation agreements.
  79. 79. 6. The principal at the time of ratification must have the full knowledge of the material facts [Section 198]. 7. The principal must ratify the whole of the transaction. This implies that he cannot ratify at his will a part of the transaction and repudiate the rest. 8. The act must be ratified in time. A contract cannot be ratified after the time fixed for its performance. If no such time is fixed, it must be ratified within a reasonable period of time, from the principal’sacquiring notice of the unauthorised act. 9. Ratification cannot be made so as to subject a third party to damage [Section 196], or terminate any right or interest of a third person [Section 200].
  80. 80. Effect of ratification The effect of ratification is to put the principal, agent, and the third party into the position that they would have been if the agent’s acts had been authorised from the beginning. Ratification, in fact, relatesback to the time of the unauthorised act and not to the date when the principal ratified the said act.
  81. 81. Agency by operation of law An agency, under certain circumstances, also comes into existence by operation of law. Such an agency comes into existence neither by an express agreement nor by estoppel and ratification, but by the provisions of the lawof land. Partnership firm is an universal example of this type of agency. When a partnership is formed, every partner, by operation of law, automatically becomes the agent of other partners and the firm.
  82. 82. Rights of Agent 1. Right to remuneration 2. Right of retainer 3. Right of lien 4. Right to be indemnified against consequences of lawful acts 5. Right to be indemnified against consequences of acts done in good faith
  83. 83. Duties of an Agent 1. Duty to act within the scope of the authority 2. Duty to follow instructions or customs 3. Duty to act with due care and skill 4. Duty to render accounts 5. Duty to communicate 6. Duty to remit sums 7. Fiduciary duty.
  84. 84. Rights and Duties of Principal Towards Agent Personal Liability of Agent to Third Party 1. Where the contract expressly provides for the personal liability of the agent. 2. Where an agent acts for a principal residing abroad 3. Where he/she does not disclose the name of the principal, he/she is treated as a party to the contract, hence personally liable to third party 4. Where the principal, though disclosed, cannot be sued on account of his/her being a minor, a foreign sovereign, or an ambassador, etc
  85. 85. 5. When an agent enters into a contract with the third party in his/her own name, concealing not only the name of the principal but also the factthat there is a principal. 6. An agent is liable for breach of warranty of authority. As per Section 235, when a person untruly represents himself/herself to be the authorised agent of another and, thereby, induces a third party to dealwith him/her as agent, 7. Where the custom or usage of a trade makes the agent personally liable, he/she will be liable to the third party. 8. An agent’s authority is said to be coupled with interest when the agent has a personal interest in the subject matter of the contract
  86. 86. Principal’s Liability for Agent’s Acts The effect of a contract made by an agent varies according to the circumstances under which the agent contracted. 1. When agent acts within the scope of his authority 2. When agent exceeds his authority 3. Principal is bound by notice given to agent 4. Liability of principal under doctrine of estoppel 5. Liability for agent’s torts or other wrongs 6. Liability of unnamed principal 7. Liability of undisclosed principal
  87. 87. Termination of Agency Agency, as a contract, gets terminated by any event that terminates a contract, such as by performance, revocation, or destruction of subject matter, and also in certain special ways. Accordingly, the various modes of terminating an agency can broadly be classified into the following two categories: 1. By act of the party 2. By operation of law.
  88. 88. Termination by Act of the Parties • Revocation of authority by the principal When can the principal revoke the agent’s authority Revocation cannot be exercised in respect of partly exercised authority The principal cannot revoke the authority given to his agent after the authority has been partly exercised, as regards such acts and obligations that arise from acts already done in the agency.
  89. 89. Compensation for revocation 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 for any previous revocation of the agency without sufficient cause [Section 205]. Notice of revocation Reasonable notice must be given of revocation or renunciation, otherwise, the damage thereby resulting to the agent must be made good to by the principal [Section 206]. Revocation may be expressed or implied
  90. 90. Renunciation of authority by the agent Section 206 says that reasonable notice must be given of renunciation, otherwise, the damage thereby resulting to the principal must be made good by the agent. Like, revocation, renunciation may also be expressed or implied in the conduct of that agent. For example, A employs B to sell his car within a week. B fails to sell the car within the stipulated time. There is an implied renunciation of authority on part of B. By mutual agreement An agency, like any other agreement, can be terminated, at any time by mutual agreement between the principal and the agent.
  91. 91. Termination of Agency by Operation of Law • Completion of business • Death or insanity of the principal or agent • Insolvency of the principal • Expiry of time • Destruction of the subject matter • Dissolution of company • Upon principal or agent becoming an alien enemy