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    Saturday, 11 March 2017

    Consequences of Agent's Contract

    Enforcement and consequences of agent's contracts
    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. Section 226

    Contracts by agent
    A contract made by an agent is binding on the principal for whom it is made. Thus the manager of a mine can make a contract binding on the owner of the mine.

    Compromise by agent
    A compromise by an agent on behalf of his principal is valid. Thus a compromise with the authorized attorney of a pardanahnashin lady is valid.

    Payment made to agent
    A payment to an agent is a payment to the principal. Thus where a military contractor, according to rules, deposited a certain sum in the bank by way of security. The bank issued a deposit certificate in the name of the military authorities. The bank subsequently went into liquidation. It was held, that the bank had become an agent to the military authorities, and on its failure to pay the military authorities were liable to pay.

    Sale transactions
    It is wrong to assume that every "general" Power-of-Attorney on account of the said description means and includes the power to alienate or dispose of property of the principal. In order to achieve that object it must contain a clear separate clause devoted to that object.

    Liability of principal for acts of agent
    A representation by an agent is as effectual for the purposes of estoppel as one made by the principal. The liability of the principal upon a contract made on his behalf is not affected by the bare fact of the agent's personal liability and the credit given to the agent by the other contracting party.


    Agents are of two kinds, distinguishable as servants and independent contractors. When the agent is an independent contractor, his employer is not. in general, answerable for the torts either of the Contractor himself or of his servants. But when the agent is a servant, his employer will answer for all torts committed in the course of the employment, whether or not the employer has obtained any benefit there by. The distinction between a servant and an independent contractor is that the former is to obey his employer's orders from time to time and works under the supervision and direction of his employer; Whereas the latter is to exercise his own discretion as to the mode and time of doing work for which he has been engaged; he is bound by his contract but not by his employer's orders.

    Suits by principal
    A principal can sue on a contract entered into by his agent. Thus where the goods were consigned from Pakistan to be delivered in India. Pakistan Railway carried the goods to the border and Indian Railway received them. It was the consignor who paid the Indian Railway. In a suit for damages, it was held that the Pakistan Railway made the contract with the Indian Railway as an agent of the consignor for delivery of goods to the consignee, and the consignor can therefore enforce the contract against the Indian Railway.

    Suit against principal or agent
    The liability of the principal and the agent when concurrent is alternate. The person contracting with the agent can sue either the agent or the principal. If, however, he sues the agent to judgment, he cannot afterwards bring a second action against the principal even though the judgment is unsatisfied and the plaintiff had no knowledge of the existence of the principal.

    Acts in excess of agent's authority
    An act of an agent in excess of his power-of-attorney does not bind the principal. The authority conferred by a power-of-attorney must be adhered to strictly, and if the authority is exceeded, a third party will be unable to make the principal liable.

    Unauthorized acts of agent
    The principal is liable to the extent of the benefit received in an unauthorized transaction. Where an agent borrowed for the principal without his authority but the money was credited to the principal's account, the principal is liable to pay back the amount.

    Negligence of agent

    The master is liable for the negligence of his agent. Therefore where A drew a bill in favour of B on C and gave it to B's agent. B's agent had asked A for a bill drawn on himself and not on C but he kept the bill without ascertaining its nature for some time. In the meantime C became insolvent. It was held that assuming both parties were under a mistake as to the bill. B could not recover the amount of the .bill from A, as his agent had been guilty of gross negligence in taking the bill and keeping It without ascertaining its nature.
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    Item Reviewed: Consequences of Agent's Contract Rating: 5 Reviewed By: Usman Ali
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