Page 125 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes
Example: A employs B as a bricklayer in building a house and puts up the
scaffolding himself. The scaffolding is unskillfully put up and B is in consequences hurt.
A must make compensation to B.

Task Analyze the role and rights of agents in real estate sector.

12.5 Principal’s Duties to the Agent and his Liabilities to
Third Parties

Duties of a Principal

The rights of agent are in fact the duties of the principal. Thus a principal is (i) bound to indemnify
the agent against the consequences of all lawful acts done by such agent in exercise of the authority
conferred upon him (ii) liable to indemnify agent against the consequences of an act done in good
faith, though it causes an injury to the rights of third persons (iii) bound to compensate his agent
in respect of injury caused to such agent by the principal’s neglect or want of skill (s.225).
The principal is, however, not liable for acts which are criminal in nature though done by the
agent at the instance of the principal (s.224).

Liability of Principal to Third Parties

Liabilities of a principal to third parties are given below:

1. Agent being a mere connecting link binds the principal for all his acts done within the
scope of his authority.

Example: A, being B’s agent with authority to receive money on his behalf,
receives from C a sum of money due to B. C is discharged of his obligation to pay the sum
in question to B.

2. The principal is liable for the acts of the agent falling not only within the actual authority
but also within the scope of his apparent or ostensible authority.
3. Where agent exceeds his authority and the part of what he does, which is within his
authority, can be separated from the part which is beyond his authority, so much only of
what he does as is within his authority, is binding as between him and the principal.

Example: A, being the owner of a ship and cargo, authorizes B to procure an
insurance for Rs 4,000 on the ship. B procures a policy of Rs 4,000 on the ship and another
for the like sum on the cargo. A is bound to pay the premium for the policy on the ship,
but not the premium for the policy on the cargo.
However, where agent does more than he is authorized to do and what he does beyond the
scope of his authority cannot be separated from what is within it, the principal is not bound
by the transaction (s.228).

Example: Agent is authorized to draw a bill for Rs 5,000 but he draws a bill for
` 10,000, the principal will not be liable even to the extent of Rs 5,000.

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