Introduction-

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. As, an
agent is performing the work under the authority given by the principal, then for that act he’ll not be
personally liable, only the principal will be liable. But there are scenarios where the agent is personally
liable, which the paper discusses and tries to bring out the basic principle of the laws that governs the
Liabilities of an Agent under Indian Contract Act, with reference to the English Laws.

Research Methodology-

The paper studies the Section 230 to 236 of Indian Contract Act with the following case laws
involved-

 Cochin frozen Food Exports (P) Ltd v Vanchinad Agencies, (2004) 13 SCC 434
 Bhojabhai v Hayen Samuel, ILR (1898) 22 Bom 754.
 Collins v Wright, (1857) 8 E&B 647

Hypothesis-

- The Agent being appointed by the principal, need not be liable for the acts performed under the
supervision of the principal, with some exceptions to it.
- The Indian laws governing the liabilities of an Agent are taken up from the basic principles of the
English Law.

Research Questions-

Who will be held liable in the case of dispute arising with the foreign principal?
What is the legal stand under the Indian Law when Principal remains undisclosed or unnamed
during contract?
Will Agent be liable for a minor principal?
What is the liability of pretended Agent?
What happens when Agent breaches the warranty of his authority?
Are the English Law and Indian Law legislating Agent’s liabilities based upon similar
principles?

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Indian Contract Act-

Personal Liabilities of an Agent-

S. 230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal—

“In the absence of any contract to that effect, ………... , nor is he personally bound by them.”

The primary duty of an agent is to establish contractual relationships between his principal and third
parties. The agent then walks away. On contracts made on his principal's behalf, he cannot sue or be
sued. In the absence of a contract to that effect, Section 230 states that an agent cannot personally
enforce contracts entered into on behalf of his principal, nor is he personally obligated by them. It
indicates that if an agent is executing work under the authorization of the principal, he will not be
personally accountable for that act; only the principal will be. This is known as the principle of the
agent's immunity from personal accountability.

However, there are several scenarios in which the agent is personally liable. There may be a contract
to the contrary, according to Section 230, which integrates the notion of agent immunity for personal
liability. To put it another way, the agent may agree to take on personal liability. The clause goes on to
say that a contract is deemed to exist in the following situations:

1. Foreign Principal-
There is a presumption that when an agent contracts for "a merchant located abroad," the agent
assumes personal obligation. [Section 230(1)] The initial presumption of English law was that the
agent was solely answerable, and that he had no authority to pledge a foreign principal's credit.
The presumption was necessary at a time when it was difficult to sue foreign principals, and a
custom developed that the agent of a foreign principle is personally liable for the convenience of
merchants. However, because of the changing nature of international trade, merchants now place
their trust in one another, and agents do not want to be held personally liable. Because the
assumption is still in place, an agent can only overcome it by contracting in a way that
demonstrates a desire to avoid personal liability.

The presumption has statutory force in India because of the provision in Section 230. For the
purposes of this assumption, a company registered in England with a place of business in India has
been determined to be a foreign principle, and the Indian agent acting for it has been held
personally accountable.1
Cochin frozen Food Exports (P) Ltd v Vanchinad Agencies2
1
Tutika Basavaraju v Parry & Co, ILR (1904) 27 Mad 315
2
Cochin frozen Food Exports (P) Ltd v Vanchinad Agencies, (2004) 13 SCC 434

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 - In this case High Court had permitted a suit on a France based business and denied liability of
their Indian Agents on the light of the fact that Foreign Based Principal had disclosed his
identity, so the agents must not be held liable. The Appellant filed a decree in order to bring the
agents too under the liability on the principle of the Section 230(1) of Indian Contract Act,
1872.
- It was held herein that, in terms of S. 230 Exception (1), the principal's disclosure or non-
disclosure is irrelevant; the sole need is that the principal be a foreign resident. Hence the
decision was reconsidered stating the Indian Agents being liable.

2. Principal Unnamed-
When an agent "does not disclose the name of his principal," he is presumed to be personally
liable. Because he is a party to the contract, an agent who contracts for an undeclared principal is
personally accountable. However, there is only a presumption of his personal accountability when
he contracts for an unidentified principle. Even if the agent discloses his representative character
but not his principal's identity, the presumption may arise.

Bhojabhai v Hayen Samuel3-

In this Case, a school's honorary secretary was held personally accountable for the rent of a
residence he rented in his own name, even though it was for the school's use.

Personal liability could not be imposed on an agent who revealed his character as the secretary of a
club.4 When the representative character is already known to a third party, the identical
consequence will occur. However, in every scenario, the form of contract will be the deciding
element.

3. Non-Existent or Incompetent Principal-

When an agent contracts on behalf of a principal who "cannot be sued despite being disclosed," he
is deemed to be personally liable. When an agent signs a contract on behalf of a minor and the
minor is not held liable, the agent is held personally liable. Also, a company cannot be sued
because it did not exist at the time of the contract and an agent of an unformed company becomes
personally liable.5
S. 233. Right of person dealing with agent personally liable. —

3
Bhojabhai v Hayen Samuel, ILR (1898) 22 Bom 754.
4
NWP Club v Sadullah, ILR (1898) 20 All 497
5
. Kelnerv Baxter, (1866) LR2 CP174

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“In cases where the agent is personally liable, a person dealing with him may hold either him or
his principal, or both of them liable.”

The third party must pick between the agent's liability, the principal's liability, or both, and his
decision is final. Conduct can be used to express or imply election. When a third party debits the
principal's or agent's account, obtains a negotiable instrument from one or the other in payment of
the price, or sues one or the other, an implicit election occurs.6

S.234. Consequence of inducing agent or principal to act on belief that principal or agent will
be held exclusively liable. —
“When a person who has made a contract with an agent induces the agent to act upon the belief
that the principal only will be held liable, or induces the principal to act upon the belief that the
agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively.”

If the agent is led to believe that only the principal will be held liable, or if the principal is led to
believe that only the agent will be held liable, he cannot later modify his mind. He'd have to limit
himself to the liabilities of someone he'd chosen through that process. Thus, if a buyer of goods
gave notice to the seller's agent that the agency alone would be held liable if the items did not meet
contract quality, the principal could not be held liable.7

Liability of Pretended Agent-

S. 235. Liability of pretended agent—
“A person untruly representing himself to be the authorised agent of another, ………..to make
compensation to the other in respect of any loss or damage which he has incurred by so dealing.”

Thus, if a person claims to operate as another's agent, the principal may be able to save him by
ratifying his deed. However, if the pretended agent does not receive confirmation, he becomes
personally liable to the third party for any losses he may have incurred as a result of relying on the
authority representation. It would make no difference to his culpability whether he honestly
believed he possessed the power in question or whether his principal would ratify his act even if he
did not.8
Breach of warranty of authority-

6
Addison v Gandasequi, (1812) 4 Taunt 574
7
Madhadev Ganga Prasad v Gouri Shankar Sanganaria, lLK (1949) 1Cut453
8
Collins v Wright, (1857) 8 E&B 647

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The liability of an agent for violation of warranty of authority is closely related to that of a
purported agent. When a person is in reality an agent but acts outside of his authority or claims to
have authority that he does not have, he violates the warranty of authority and is personally
accountable to the third party for any harm he suffers as a result of acting on the false
representation.9

Collins v. Wright-10
W worked as a land agent for a certain G. W agreed to give the plaintiff a 12 and a half year lease
on G's farm. He honestly believed he had the authority to act in this manner. G, on the other hand,
refused to sign the lease and demonstrated that he had not given the agent any such permission.
After W died, the plaintiff sued his executors for the loss he had suffered by entering the farm, and
they were found accountable.
It was held by Willes J that,
“The fact that the proclaimed agent honestly believes he has authority has an impact on the moral
nature of his conduct; nonetheless, his moral innocence in relation to the person whom he has led
to contract has no bearing on the inconvenience and damage that he suffers. The obligation that
arises in such a case is well expressed by saying that a person professing to contract as an agent for
another implicitly, if not expressly, undertakes to or promises the person who enters into such a
contract, on the faith that the professed agent is duly authorised, that the authority that he professes
to have actually exists.”

Dissimilarities in Indian and English Law-

Majorly the provisions and liabilities attached with Agents are similar in nature within the Indian
and English Law, whereas some dissimilarities are there that this paper would cover.

 In Section 233 of Indian Contract Act, “where the agent is personally liable, a person
dealing with him may hold either him or his principal, or both of them, liable”

This appears to be a deviation from English law, which requires the third party to choose
between the principal's and agent's liability, and the choice is final and binding on him.  He
cannot sue the principle after obtaining a judgement against the agent, for example, even
though the judgement against the agency remains unfulfilled.

9
Ganpat Prasad v Sarju, (1912) 9 All LJ 8
10
Collins v Wright, (1857) 8 E&B 647

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 The English law seems contrary to justice, as taking example that B should not be able to
sue P even if his judgement against A is not up to the mark. This was the reason for Indian
Law being deviating from English Law. 11

Conclusion and Analysis-

Under the Indian Laws, if an agent is performing the work under the authority given by the
principal, then for that act he’ll not be personally liable, only the principal will be liable.
However certain circumstances and conditions are provided under the Indian Contract Act where
the Agent is Personally liable. The liabilities listed under Indian Law are somewhat similar to
and based on the founding stone of the English Law, whereas the legislation of Section 233 of
Indian Contract Act deviating from the legislation of English Law.

Bibliography-

1. Avtar Singh: Law of Contract (Eastern Book Co. 12th Edition, 2017)

2. www.lexisnexis.co.uk

3. www.scconline.com

4. www.manupatrafast.com

11
Powell, The Law of Agency (2nd Edn, 1961) 270.

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