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Mercantile Laws-I

Notes 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, 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.

Task “A” consigned goods by Railways. The consignment, at the time of delivery, was

found damaged. After obtaining a certificate of damages from the Railway Offi cer, A
claimed from the Railways compensation of ` 2,300. The general Manager of the Railways

sent him a cheque for ` 1,300 in full and final settlement. The cheque was encashed, but

after a lapse of sometime. A claimed that the payment had satisfied only a part of his claim
and demanded payment of the balance. Discuss the claim of A for payment of the balance
amount.

9.7 Termination of Agency

An agent’s authority can be terminated any time. It is terminated by insanity of either party by
bankruptcy and by the destruction of subject matter.
9.7.1 Circumstances under which Agency Terminates or Comes to an End

Agency may be terminate by the principle and agent such as: (1) On revocation by the principal,

(2) On the expiry of fixed period of time, (3) On the performance of the specifi c purpose,
(4) Insanity or death of the principal or agent, (5) Insolvency of the principal, (6) By renunciation
of agency by the agent.
1. On revocation by the principal: The principal may, by notice, revoke the authority of the
agent at any time. Where the agent is appointed to do a single act, agency may be revoked
any time before the commencement of the act. In case of a continuous agency, notice of
revocation is essential to the agent as well as to the third parties who have acted on the
agency with the knowledge of the principal.
Where agency is for a fixed period of time and the contract of agency is revoked without

sufficient cause, compensation must be paid to the agent (s.205).However, the agency is
irrevocable in two cases: (i) Where the authority of the agent is one coupled with interest;
i.e., the agent has an interest in the subject-matter of the contract. The principal cannot
revoke the authority given to his agent after the authority has been partly exercised so far
as regards such acts and obligations already done in the agency (s.204).

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