Sales of Good Act 1930Contract of Sale - A contract
of sale of goods is a contract whereby the seller transfers,
or agrees to transfer, the property in goods to the buyer
for a priceSec-4(3). There may be a contract of sale
between one part-owner and another. A contract of sale
may be absolute or conditional.
Essential elements ofContract of sale (1) At least two
parties : To make a contract of sale there must be at
least two parties. These parties must be distinct, that is,
a buyer and a seller. These parties should be also
competent to make a contact. In this context the word
‘buyer’ means any person who buys or agrees to buy the
goods and the word ‘seller”’ means any person who sells
or agrees to sell the goods. (2) Goods : the subject-matter
of the contract of sale of goods must be some goods the
purpose of this contract is to transfer the property in
these goods from the seller to the buyer. And the goods
forming the subject-matter of contract should be
movable. The regulation of transfer of immovable
property does not come within the purview of sale of
Goods act (3) Price-the consideration : In a contract of
sale the consideration is price. The price must be money
when the goods are sold in exchange for goods; this is
not sale but only a barter. But price or consideration
may by partly in money and partly in goods. (4) General
property : In a contract of sale the object is to transfer
general property, from the seller to the buyer, in the
goods. General property in the goods in different from
special property in the goods. If a person has the
ownership of the goods, it means, he has the general
property in the goods. If the owners of the goods pledge
these goods with a money-lender, the moneylender has
special property in the goods. (5) In a contract of sale all
the essential elements of a valid contract must be
present, namely, agreement, intention to create legal
relationship, capacity to make contract, free consert,
lawful consideration, lawful object, etc.
Distinction between Sale and Agreement to Sell:-The
following points will bring out the distinction between
sale and an agreement to sell: a) In a sale, the property
in the goods sold passes to the buyer at the time of
contract so that he becomes the owner of the goods. In
an agreement to sell, the ownership does not pass to the
buyer at the time of the contract, but it passes only when
it becomes sale on the expiry of certain time or the
fulfillment of some conditions subject to which the
property in the goods is to be transferred. b) An
agreement to sell is an executory contract; a sale is an
executed contract. c) An agreement to sell is a contract
pure and simple, but a sale is contract plus conveyance.
d) If there is an agreement to sell and the goods are
destroyed by accident, the loss falls on the seller. In a
sale, the loss falls on the buyer, even though the goods
are with the seller. e) If there is an agreement to sell and
the seller commits a breach, the buyer has only a
personal remedy against the seller, namely, a claim for
damages. But if there has been a sale, and the seller
commits a breach by refusing to_ deliver the goods; the
buyer has not only a personal remedy against him but
also the other remedies which an owner has in respect
of goods themselves such as a suit for conversion or
detinue, etc
Conditions and Warranties It is usual for both seller
and buyer to make representations to each other at the
time of entering into a contract of sale. Some of these
representations are mere opinions which do not form a
part of contract of sale. Whereas some of them may
become a part of contract of sale. Representations which
become a part of contract of sale are termed as
stipulations which may rank as condition and warranty
e.g. a mere commendation of his goods by the seller
doesn’t become a stipulation and gives no right of action
of the buyer against the seller as such representations
are mere opinion on the part of the seller. But where the
seller assumes to assert a fact of which the buyer is
ignorant, it will amount to a stipulation forming an
essential part of the contract of sale.Stipulation
[Section 12(1)] A stipulation in a contract of sale of
goods may be a condition or warranty [Section 12(1)].
Condition [Section 12(2)] A condition is a stipulation
(a) Which is essential to the main purpose of the
contract, and (b) The breach of which gives the aggrieved
party a right to terminate the contractA warranty is a
stipulation (a) Which is collateral to the main purpose of
the contract, and (b) The breach of which gives the
aggrieved party a right to claim damages but not right to
reject goods and to terminate the contract.
When condition to be treated as warranty [Section
13] In the following three cases, a breach of a condition
is treated as a breach of a warranty: (a) Where the buyer
waives a condition: once the buyer waives a condition,
he cannot insist on its fulfillment e.g. accepting defective
goods or beyond the stipulated time amounts to waiving
a condition. (b)Where the buyer elects to treat breach of
the condition as a breach of warranty; e.g. where he
claims damages instead of repudiating the contract. (c)
Where the contract is not severable and the buyer has
accepted the goods or part thereof, the breach of any
condition by the seller can only be treated as a breach of
warranty. It cannot be treated as a ground for rejecting
the goods unless otherwise specified in the contract.
Thus, where the buyer after purchasing the goods finds
that some condition is not fulfilled, he cannot reject the
goods. He has to retain the goods entitling him to claim
damages
Rules as to delivery:-The following rules apply
regarding delivery of goods: (a) Delivery should have the
effect of putting the buyer in possession. (b)The seller
must deliver the goods according to the contract. (c)The
seller is to deliver the goods when the buyer applies for
Implied Warranties [Section 14(b), 14(c), and
delivery; it is the duty of the buyer to claim delivery.
16(3)]Warranty as to Quiet Possession [Section 14(b)]
(d)Where the goods at the time of the sale are in the
there is an implied warranty that the buyer shall have
possession of a third person, there will be delivery only
and enjoy quiet possession of the goods. The reach of
when that person acknowledges to the buyer that he
this warranty gives buyer a right to claim damages from
holds the goods on his. behalf. . (e)The seller should
the seller. (b) Warranty of Freedom from Encumbrances
tender delivery so that the buyer ca~ take the goods. It
[Section 14(c)] there is an implied warranty that the
is no duty of the seller to send or carry the goods to the
goods are free from any charge or encumbrance in favour
buyer unless the contract so provides. But the goods
of any third person if the buyer is not aware of such
must be in a deliverable state at the time of delivery or
charge or encumbrance. The breach of this warranty
tender of delivery. If by the contract the seller is bound
gives buyer a right to claim damages from the seller. (c)
to send the goods to the buyer, but no time is fixed, the
Warranty as to Quality or Fitness for Particular Purpose
seller is bound to send them within a reas9nable time
which may be annexed by the Usage of Trade [Section
16(3)
Suits for Breach of Contract:-Were the property in the
goods has passed to the buyer, the seller may sue him
Explain the doctrine of Caveat Emptor.What is
exceptions to the doctrine of Caveat for the price. Where the price is payable on a certain day
Emptor?Doctrine of Caveat Emptor :- The term caveat
regardless of delivery, the seller may sue for the price, if
emptor is a Latin word which means "let the buyer
beware". This principle states that it is for the buyer to it is not paid on that day, although the property in the
satisfy himself that the goods which he is purchasing are
goods has not passed.Where the buyer wrongfully
of the quality which he requires. If he buys goods for a
neglects or refuses to accept the goods and pay for them,
particular purpose, he must satisfy himself that they are
fit for that purpose. Section 6 provides that "subject to the seller may sue the buyer for damages for non-
the provisions of this Act and of any other law for the
acceptance.Where the seller wrongfully neglects or
time being in force, there is no implied warranty or
condition as to the quality or fitness for any particular refuses to deliver the goods to the buyer, the buyer may
purpose of goods supplied under a contract of sale". In
sue for damages for non-delivery.Where there is a
simple words, it is not the seller's duty to give to the
breach of warranty or where the buyer elects or is
buyer the goods which are fit for a suitable purpose of
the buyer. If he makes a wrong selection, he cannot compelled to treat the breach of condition as a breach of
blame the seller if the goods turn out to be defective or
warranty, the buyer cannot reject the goods. He can set
do not serve his purpose. The principle was applied in
the case of Ward v. Hobbs. (1878) 4 A.C. 13, where breach of warranty in extinction or dimunition of the
certain pigs were sold by auction and no warranty was price payable by him and if loss suffered by him is more
given by seller in respect of any fault or error of
description. The buyer paid the price for healthy pigs. than the price he may sue for the damages.If the buyer
But they were ill and all but one died of typhoid fever. has paid the price and the goods are not delivered, the
They also infected some of the buyer's own pigs. It was
buyer can sue the seller for the recovery of the amount
held that there was no implied condition or warranty
that the pigs were of good health. It was the buyer's duty paid. In appropriate cases the buyer can also get an
to satisfy him regarding the health of the pigs. The
order from the Court that the specific goods ought to be
expression ‘Caveat Emptor’ means ‘let the buyer beware’.
The doctrine of caveat emptor has been given in the first delivered.
Para of Section 16 which reads as under: “Subject to the
provisions of this Act and any other la for the time being
in force, there is no implied warranty or condition as to
What is Goodwill?The first issue towards
the quality or fitness for particular purpose of good
approaching this section is the definition of
supplied under a contract of sale”. In other words, it is
goodwill. 'The goodwill which has been the subject of sale
not part of the seller’s duty to point out defects of the
is nothing more than the probability that the old customer
goods which he offers for sale, rather it is the duty of the
will resort to the old place.' The definition cited above is
buyer to satisfy himself about the quality as well as the
of course the very simplistic and rather lay men meaning
suitability of the goods.
of what goodwill results in. It has `edxbeen more
elaborately defined in Trego v.
Exceptions to the Doctrine of Caveat Emptor (a) In
Case of Misrepresentation by the Seller Where the seller
makes a misrepresentation and the buyer relies on that
representation. (b) In Case of Concealment of Latent What is Partnership Deed and what are its main
Defect Where the seller knowingly conceals a defect contents?Meaning of Partnership DeedA partnership
which would not be discovered on a reasonable comes into existence by agreement between the persons
examination. (c) In Case of Sale by Description [Section who want to share the profit of the business. Such an
15] where the goods are sold by description and the agreement may be implied by the conduct of the partners
goods supplied by the seller do not correspond to the or may be express (Oral or written). In order to avoid
description. (d)In Case of Sale by Sample [Section 17] future dispute, it is advisable to have a written
where the goods are sold by sample and the goods agreement. The document containing the agreement
supplied by the seller do not correspond with the between partners is called ‘Partnership deed’. The
sample. (e) In Case of Sale by Sample as well as document containing the agreement between the
Description [Section 15] where the goods are sold by partners is called ‘Partnership Deed’. The deed must be
sample as well as description and the goods supplied do properly stamped and signed by all the partners except
not correspond with sample as well as description
a minor who has be admitted in the benefits of
partnership.
Performance of the Contract of Sale:-It is the duty of
the seller and buyer that the contract is performed. The
duty of the sellers is to deliver the goods and that of the
buyer to accept the goods and pay for them in Contents of a Partnership Deed
accordance with the contract of sale. Unless otherwise
agreed, payment of the price and the delivery of the
The partnership deed must contain the following
goods and concurrent conditions, i.e., they both take
particular:The name of the firm.The names and
place at the same time as in a cash sale over a shop
addresses of the partners.The nature of the
counter.,
business.The term or duration of partnershipThe
amount of capital to be contributed by each partner.The
Delivery (Sections 33-39):-Delivery is the voluntary drawings that can be made by each partner.The interest
transfer of possession from one person to another. to be allowed on capital and charged on drawings.Rights
Delivery may be actual, constructive or symbolic. Actual of partners.Duties of partners.
or physical delivery takes place where the goods are
handed over by the seller to the buyer or his agent
Dissolution of Partnership Firm
authorised to take possession of the goods. Constructive
delivery takes place when the person in possession of the When the relation between all the partners of the firm
goods acknowledges that he holds the goods on behalf of comes to an end, this is called dissolution of the firm.
and at the disposal of the buyer. For example, where the Section 39 of the Indian Partnership Act, provides that
seller, after having sold the goods,may hold them as “the dissolution of the partnership between all the
bailee for the buyer, there is constructive delivery. partners of a firm is called the dissolution of a firm.” It
Symbolic delivery is made by indicating or giving a implies the complete breakdown of the relation of
symbol. Here the goods themselves are not delivered. but
partnership between all the partners. Dissolution of a
the "means of obtaining possession" of goods is
Partnership firm may be affected in the following ways:
delivered, e.g, by delivering the key of the warehouse
a) Dissolution without the intervention of the Court b)
where the goods are stored, bill of lading which will
Dissolution by Court.
entitle the holder to receive the goods on the arrival of
the ship.
Q.1 Define a contract of Indemnity. What are the
essential elements of a contract of Indemnity?What
are the rights of Indemnity holder?Ans. Contract of
Indemnity:-In the old English law, Indemnity was
defined as a promise to save a person harmless from the
consequences of an act. Such a promise can be express
or implied from the circumstances of the case. This view
was illustrated in the case of Adamson vs Jarvis 1872.
In this case, the plaintiff, an auctioneer, sold certain
goods upon the instructions of a person. It turned out
that the goods did not belong to the person and the true
owner held the auctioneer liable for the goods. The
auctioneer, in turn, sued the defendant for indemnity for
the loss suffered by him by acting on his instructions. It
was held that since the auctioneer acted on the
instructions of the defendant, he was entitled to assume
that if, what he did was wrongful, he would be
indemnified by the defendant.Section 124 - 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 a "contract of
Indemnity". Illustration - A contracts to indemnify B
against the consequences of any proceedings which C
may take against B in respect of a certain sum of Rs 200.
This is a contract of indemnity
Essentials of a contract of indemnityA valid contract
of indemnity should fulfill the following
conditions:Anticipated loss : A contract of indemnity is a
security for an anticipated loss.Requirements of valid
contrac t : Contract of indemnity being a species of
contract must have all essentials of a valid contract like
free consent, competence of the parties, consideration,
etc.To save other party : There must be a promise to save
the other party from some loss.Covers only the actual
loss : It covers only the actual loss may be due to the
promisor himself or any other person and it covers only
the loss caused by an event mentioned in the contract.
The event mentioned in the contract must happen.
Define Contract of Guarantee
Ans. Contract of Guarantee :- Section 126 of the
Indian Contract Act, 1872 defines a contract of
guarantee as contract of guarantee is a contract to
perform the promise or discharge the liability, of a third
person in case of his default. The Section further
provides that the person who gives the guarantee is
called the “surety”, the person in respect of whose
default the guarantee is given is called “principal
debtor”, and the person to whom the guarantee is given
is called the “creditor”. For example, A takes a loan from
a bank. A promise to the bank to repay the loan. B also
makes promises to the bank saying that if A does not
repay the loan “then I will pay.” In this case, A is the
principal debtor, who undertakes to repay the loan; B is
the surety, whose liability is secondary because he
promises to perform the same duty in case there is
default on the part of A. The bank in whose favour the
promise has been made is the creditor.
Revocation or termination of a continuing
guarantee- A continuing guarantee may be revoked:By
notice . A continuing guarantee may at any time be
revoked by the surety as to the future transactions, by
the notice to the creditor. ( Sec. 130)By the death of
surety . The death of the surety generally operates as a
revocation of a continuing guarantee, so far as regards
future transactions ( Sec. 131 )By variance in terms of
the contract . Any variance, made without surety’s
consent, in the terms of the contract , between the
principal debtor and the creditor, discharges the surety
as to the transactions subsequent to the variance. (Sec.
133 ) Example. A becomes surety to B for the amounts
he lends to C up to Rs.10,000 at 20 percent per annum.
Afterwards, when B had already lent Rs.6,000 to C they
mutually agree that the rate of interest for the
subsequent loans should be reduced to 10 percent only.
A is discharged from the liability for the subsequent
loans.By novation . A continuing guarantee can be also
determined by the novation which means substitution of
the new contract for the old one.
Q:-4 Explain the nature and extent of surety liability.
State the circumstances in which surety is
discharged from his liability. Ans-Liability of
Surety:-According to Section 128, “The liability of the
surety is coextensive with that of the principal debtor,
unless it is otherwise provided by the contract.” The
provision that the surety’s liability is coextensive with
that of the principal debtor means that his liability is
exactly the same as that of the principal debtor. It means
that on a default having been made by the principal
debtor, the creditor can recover from the surety all what
he could have recovered from the principal debtor.For
instance, the principal debtor makes a default in the
payment of a debt of Rs. 10,000/-. The creditor may
recover from the surety the sum of Rs. 10,000/- plus
interest becoming due thereon as well as the amount
spent by him in recovering that amount. This may be
further explained by the following example. A
guaranteed to B the payment of a bill of exchange by C,
the acceptor. The bill is dishonored by C, the acceptor,
is liable not only for the amount of the bill but also for
any interest and charges which may have become due
on it. If the principal debtor’s liability is reduced, e.g.,
after the creditor has recovered a part of the sum due
from him out of his property, the liability of the surety is
also reduced accordingly. Case Law Narayan Singh v. s
Chattarsingh, Nature and extent :-
Discharge of surety from liability:-When the liability of
surety, which he had undertaken under a contract of
guarantee, is extinguished or comes to an end, he is said
to be discharged from liability. The modes of discharge
of a surety, as recognized by the Indian Contract Act, are
as under
Q:-5 State the rights of a surety against the principal
debtor, creditor and co-sureties. A. Against principal
debtor
(a)Right of subrogation:- After paying the guaranteed
debt, the surety steps into the shoes of the creditor and
acquires all the rights which the latter had against the
principal debtor (i.e., he gets subrogated to allthe rights
and remedies available to the creditor) (Sec. 140). If the
creditor has the right to stop goods in transit or has a
lien, the surety, on payment of all he is liable for, will be
entitled to exercise these rights.
Right of indemnity :- The surety is entitled to be
indemnified by the principal debtor for all payments
rightfully made by him (Sec. 145).2.Right against the
Creditor:-Right to securities Sec(141)Right to claim set
offRights against the creditorRight to securities
Sec(141) :-The surety can, after paying the guaranteed
debt, compel the creditor to Assign to him all the
securities taken by the creditor either before or at the
time of the contract of guarantee, whether the surety
was aware of them or not.(b)Claim to any set off :-The
surety on being called upon to pay can claim any set-off
to which the principal debtor is entitled from the
creditor.
Q.6 Define Bailment. Discuss the essential elements
of a contract of bailment. what are the types of
bailment?
Ans – Bailment:-The team “Bailment” is derived from a
French word “Ballior” which means “to give or to
deliver”. It has becomes as a technical term for the Law
of Bailment in the Common Law, where it means any
kind of handing over of certain property, particularly
good, for a certain period. It involves a change of
possession it means the delivery of the goods which are
to be returned or delivered according to the order of the
giver.Definitions: - Section 148 defines “Bailment”,
“Bailor” and “Bailee”,Sec.148 :- Bailment”, “Bailor” and
“Bailee” defined’, - 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. The person delivering the goods is called the
“Bailor”, the person to whom they are delivered is
called the “Bailee”. Example :-Ram gives his Motor Car
on hire to Ramesh for one day Ramesh prepares the
ring. He collects some charges from Ram. Ram is the
bailor. Ramesh is Bailee. It is a contract of bailment.
Essential features of a Contract of Bailment Delivery
of the goods by the bailor, Delivery should be upon
Contract, Such delivery should have a specific purpose
IV. Such delivery is temporary
Delivery of possession: - The first and most important
essential characteristic feature of the bailment is the
delivery of possession of the property from one person
to another. The delivery of the goods is temporary and
for some specific purpose only. After the purpose is
over, the goods must be returned to the bailor.
Blackstone explains “A bailment is a delivery of goods
in trust upon a contract, express or implied that the
trust shall be faithfully executed on the part of the
bailee.”
Delivery should be upon contract :- There must be a
contract between the bailor and the bailee. The bailor
delivers his goods to the bailee for temporary
possession for a specific purpose. After fulfilling such
specific purpose, the bailee returns the goods to bailor.
Therefore, it requires an express or implied contract.
Delivery should have a specific purpose :- The objecof
the bailment is ‘temporary custody of the property’ in
the bailee’s hands. The bailor hands over his goods to
the bailee for a specific purpose and intention
Consideration is not necessary in case of Contract
of Bailment :
In case of bailment for mutual benefit of the bailor and
bailee, consideration is there for both the parties e.g., A
gives his watch for repair to B for Rs. 10. For A,
consideration is repair of his watch and for B,
consideration is Rs. 10. However, in case of bailment
either for the benefit of the bailor or bailee alone,
consideration in the form of something in return is not
there. In such cases the detriment suffered by the bailor
in parting with the possession of goods is considered as
a sufficient consideration to support the promise on the
part of the bailee to return the goods.▪ Purpose: - A
pledge is made for a specific purpose, while bailment can
be made for any purpose.▪ Property: - In bailment, the
bailee gets only the possession of goods bailed. The
ownership remains with the bailor. In the case of pledge,
the pledgee acquires a special property in the goods
pledged whereby he gets possession coupled with the
power of sale, on default.▪ Right of sale :- Bailee can
exercise a lien on the goods bailed. He has no right of
sale. But in case of a pledge, the pledge can sell the goods
after due notice to pawned.
The main types of bailment are given
below:Gratuitous Bailment: Where the bailee does not
charge nay thing for the bailent it is called gratuitous
bailment.Bailment for Reward: When the bailor
charges anything for his services it is called bailment for
rewards.Bailment for Use: When the bailor delivers an
article to the bailee for use by the later in any general or
specific way, this is called a bailment for use.X delivers
his watch to Y for the latter to use it for one month. Here
bailment is bailment for used. 4) Bailment of safe
custody: If valuable goods or even coins or notes in box
are deposited for protection, it is called bailment for safe
custody.
7 - Who is a bailee? State the duties and rights of a
bailee.Ans – Bailee :-A person with whom some article is
left,usually pursuant to a contract (called a "contract of
bailment"), who is responsible for the safe return of the
article to the owner when the contract is fulfilled. In
other words the person to whom the goods are delivered
is called the bailee.
Duties/Responsibilities of a Bailee :-Duty to take
reasonable care :-Duty not to make unauthorized use
(Section 154)Duty not to mix (Section 155-157)Duty to
return (Section 160)Duty to return increase (Section
163)Duty not to set up jus tertii (Section 166)
Rights of a BaileeRight to necessary expenses (Section
158)Right to compensation (Section 164)Right of Lien
(Section 170-171) :4. Right to Sue (Section 180-181)
Duty to take reasonable care :- In English law the
duties of a gratuitous and non-gratuitous bailee are
different. However, in Indian law, Section 151 treats all
kinds of bailees the same with respect to the duty. It says
that in all cases of bailment, the bailee is bound to take
as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances
take, of his own goods of the same bulk, quality, and
value as the goods bailed. The bailee must treat the
goods as his own in terms of care. However, this does
not mean that if the bailor is generally careless about his
own goods, he can be careless about the bailed goods as
well. He must take care of the goods as any person of
ordinary prudence would of his things.
Right of Lien (Section 170-171) :- In general, Lien
means the right to keep the possession of the property
of a person until that person clear the debts. In case of
bailment, the bailee has the right to keep the
possession of the property of the bailor until the bailor
pays lawful charges to the bailee. Thus, right of Lien is
probably the most important of rights of a bailee
because it gives the bailee the power to get paid for his
services.
Q: - 8 Define pledge. Discuss the essential elements
of a pledge.
Ans – Section 172 :'The bailment of goods assecurity
for payment of a debt or performance of a promise is
called 'pledge'. The bailor in this case is called the
'pawnor'. The bailee is called the 'pawnee' (Sec. 172)
Essential Features of Valid Pledge :-The legal
definition of pledge, discussed in the last article, reveals
the essential features of pledge which are as under
Delivery of possession :- It is an essential and
important element of a valid pledge that the Possession
of the goods must be delivered by the pawnor to the
Pawnee. It may be noted that only the possession of the
goods passes from one person to the other and not the
ownership. The ownership remains with the pawnor. If
the possession is not delivered then there cannot be a
valid pledge.
The delivery of possession to the Pawnee may be of two
kinds (a) actual delivery, (b) constructive delivery.
Actual delivery means the delivery of physical
possession. And constructive delivery means when
there is no change of physical possession. The delivery
of keys of a go down where the goods are stored is the
constructive delivery. Similarly, the delivery of
documents of titles which enables the Pawnee to obtain
the possession is the constructive delivery of goods.
Contract of Agency

The law of agency governs situations where one person

(agent) is appointed to act as the

representative of another (principal) in the context of

contractual negotiations. Generally, this system will be
adopted for a number of reasons, for example it may not
be practical for one person to personally enter into all
the contracts he/she would wish. Moreover, where a
company enters into contractual negotiations, it is
important that someone be appointed as an agent to act
on behalf of that entity. Section 182 of the Indian
Contract Act defines an agent as 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”.

Essentials of a Contract of Agency :-

There should be an agreement between the principal and

the agent: It is an essential element of a valid agency.
According to this element, the agency must be created
by an agreement between the principal and the agent.
Thus, there must be an agreement by which a person is
appointed as an agent by the other. The agreement may
be express (i.e., by words of mouth or of the case.

The agent must act in the representative capacity: It is

the most important essential element of a valid agency.
The agent must act in the representative capacity, i.e.,
he must represent his relationship of his principal with
the third persons. Thus the true nature of the
relationship should be seen if the agent acts in
representative capacity and had the power to bind his
principal with the third persons, the relationship is that
of ‘agency’.

1. Kinds of Agents : - The term agent applies to anyone

who by authority performs an act for another, and
includes a great many classes of persons to whom
distinctive names are given. There may be various types
of agents whose powers and duties are settled by usage
and custom of trade recognized by the courts of law. The
important one are classified as under:

1 Express or Implied Agents :- An express agent is one

who is appointed verbally or by writing. An implied agent
is one whose appointment is to be inferred from the
conduct of the parties.

2 General, Special or Universal Agents :- A general

agent is one who is employed to transact generally all the
business of the principal in regard to which he is
employed. A special agent has only authority to do some
particular act or represent his principal in some
particular transaction. A universal agent is one who is
authorized to transact all the business of his principal of
every kind and to do all the acts which the principal can
lawfully do and can delegate.

3 Agent or Sub-agent :- An agent derives his authority

directly from the principal. A sub-agent derives his
authority from the agent who has been appointed to do
the act. One broad classification of agents is mercantile
or commercial agents and non-mercantile or non-
commercial agents.

4 Mercantile Agents :- The following are some of the

important mercantile agents.Factor :- A factor is a
mercantile agent to whom possession of goods is given
for sale

5 Commission Agent :- A commission agent is a

mercantile agent who in consideration of a certain
commission engages to purchase or sell goods for his
principal. He buys and sells goods in the market on the
best terms and in his own name. His only interest in
the transaction is his commission. All profits and losses
accrue to the principal. A commission agent may or
may not be in actual possession of the goods. His
position is very similar to that of the broker.

General Agent and Particular Agent :- A general agent

is one who represents the principal in all matters
concerning a particular business. A particular agent is
one who is appointed for a specific purposee.g. to sell a
particular article. Factors and commission agents are
usually general agents. When general agents are
appointed it is usual to execute a general power of
attorney by which the agent is given authority to do
certain things. A particular agent may be appointed by
executing a special power of attorney by which the
agent is authorized to do a specific thing. A power of
attorney must be written and stamped. A man dealing
with a particular agent is bound to find out the limits
of the authority of the act and act accordingly.