Page 122 - DCOM103_COMMERCIAL_LAW

Unit 12: Law of Agency

(ii) A principal instructs his agent to deliver goods only against cash but the agent delivers Notes
them on credit. In such a case, the agent would be liable for the price which the purchaser
fails to pay.
In the absence of instructions from the principal, however, the agent should follow the
custom of the business at the place where it is conducted.

Example: Amar, agent, engaged in carrying on for Bharat a business in which it is
the custom to invest from time to time, at interest, the money which may be in hand, omits
to make such investment. Amar must make good to Bharat the interest usually obtained
by such investment.
2. The agent should conduct the business with the skill and diligence that is generally
possessed by persons engaged in similar business, except where the principal knows that
the agent is wanting in skill (S.212).

Examples: (i) Where a lawyer proceeds under a wrong section of law and thereby
the case is lost, he shall be liable to his client for the loss.
(ii) Amar, agent for the sale of goods, having authority to sell on credit, sells to Bhagat
on credit, without making the proper and usual enquiries as to the solvency of Bhagat.
Bhagat, at the time of such sale, is insolvent. Amar has to compensate his principal in
respect of any loss thereby sustained.

(iii) Amar, an insurance broker, employed by Bharat to effect an insurance on a ship, omits
to see that whether the usual clauses are inserted in the policy. The ship is afterwards
lost. In consequence of the omission of the clauses nothing can be recovered from the
underwriters. Bharat is bound to make good the loss to Amar.
3. To render proper accounts (s.213): The agent has to render proper accounts. If the agent
fails to keep proper accounts of the principal’s business, everything consistent with the
proved facts will be presumed against him. Rendering of accounts does not mean showing
the accounts, but maintaining proper accounts supported by vouchers.
4. To communicate with the principal in case of diffi culty (s.214): It is the duty of agent, in

case of difficulty, to use all reasonable diligence, in communicating with his principal and
in seeking to obtain his instructions. In case of emergency, however, the agent can do all
that a reasonable man would, under similar circumstances, do with regard to his own
business. He becomes agent by necessity.
5. Not to make any secret profi ts: Agent should deliver to the principal all moneys including
secret commission received by him. He can, however, deduct his lawful expenses and
remuneration.
6. Not to deal on his own account: Agent should not deal on his own account without fi rst
obtaining the consent of his principal. If he does so, the principal can claim from the agent

any benefit which he might have obtained.

Example: Pawan directs Amar, his agent, to buy a particular house for him.
Amar tells Pawan that it cannot be bought, but buys the house for himself. Pawan may, on
discovering that Amar has bought the house, compel him to sell it to Pawan at the price he
bought.
Further, in case agent deals on his own account, he shall cease to be entitled for his
remuneration as agent.

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