Page 127 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes 4. In contracts with a concealed principal, the agent is, in the absence of a contract to the
contrary, personally liable to the third party. The party may hold either the agent or
principal or both liable (s.223).

Example: A enters into a contract with B to sell him 100 bales of cotton and
afterwards discovers that B was acting as agent for C. A may sue either B or C, or both for
the price of the cotton.

12.6 Personal Liability of Agent

Agent is only a connecting link between the principal and third parties. Being only a medium, he
can, in the absence of a contract to the contrary, neither personally enforces contracts entered into
by him on behalf of his principal, nor is he personally bound by them.
From the above discussion, it may be inferred that agent can enforce contracts personally and be
held bound for contracts entered into on behalf of his principal, if there is an agreement to the
effect, express or implied.
Section 230 enlists the following cases where a contract to this effect shall be presumed to exist:
1. Where the contract is made by agent for the sale or purchase of goods for a merchant
resident abroad
2. Where the agent does not disclose the name of his principal
3. Where the principal, though disclosed, cannot be sued, for instance, where principal is a
minor.
Besides, agent incurs a personal liability in the following cases:
1. Breach of warranty: Where agent acts either without any authority or exceeds his authority,
he is deemed to have committed breach of warranty of authority in such a case. He will

be held personally liable if his acts are not ratified by the alleged principal. Further, agent
will be guilty of warranty of authority even where his authority is terminated without his
knowledge, e.g., by death or lunacy of the principal.
2. Where the agent expressly agrees to be personally bound: This sort of stipulation may be
provided particularly where principal does not enjoy much credit-worthiness and the third
parties wish to ensure the payment or performance.
3. Where agent signs a negotiable instrument in his own name: In case agent signs a negotiable
instrument without making it clear that he is signing it as agent only, he may be held
personally liable on the same. He would be personally liable as the maker of the note,
even though he may be described in the body of the note as the agent (s.28 of Negotiable
Instrument Act, 1881).
4. Agent with special interest or with a beneficial interest, e.g., a factor or auctioneer, can sue

and be sued personally.
5. When agent is guilty of fraud or misrepresentation in matters which do not fall within his
authority (s.238).
6. Where trade usage or custom makes agent personally liable.
7. Where the agency is one coupled with interest.

120 LOVELY PROFESSIONAL UNIVERSITY