Page 68 - DMGT407Corporate and Business Laws

Unit 3: Contracts of Bailment and Agency

remuneration does not become payable unless he has carried out the object of agency, Notes
except where there is a contract to the contrary.
2. Right of retainer (s.217): Agent may retain, out of any sums received on account of the
principal in the business of the agency, all moneys due to himself in respect of advances
made or expenses properly incurred by him in conducting such business and also such
remuneration as may be payable to him for acting as agent. This is known as agent’s right
of retainer. However, the right of retainer can only be claimed on moneys received by
him in the business of agency. He cannot, therefore, retain sums received by him in one
business for his commission or remuneration in an other business on behalf of the same
principal.
3. Right of lien (s.221): In the absence of any contract to the contrary, agent is entitled to
retain goods, papers and other property, whether movable or immovable of the principal
received by him, until the amount due to himself for commission, disbursements and
services in respect of the same has been paid or accounted for to him. This lien of the agent
is a particular lien confined to all claims arising in respect of the particular goods and
property. By a special contract, however, agent may get a general lien extending to all
claims arising out of the agency. Since, the word ‘lien’ means retaining possession, it can
be enjoyed by the agent only where the goods or papers are in actual or constructive
possession of the agent. The right of lien will, therefore, be lost where he parts with the
possession of goods or papers. But if the possession is obtained from the agent by fraud or
unlawful means, his lien is not affected by the loss of possession.
4. Right of stoppage in transit: The agent can stop the goods while in transit in two cases:
(a) Where he has purchased goods on behalf of the principal either with his own funds, or
by incurring a personal liability for the price, he stands towards the principal in the
position of an unpaid seller. Like an unpaid seller, he enjoys the right of stopping the
goods in transit if in the meantime the principal has become insolvent. (b) Where agent
holds himself liable to his principal for the price of the goods sold, for example, del
credere agent, he may exercise the unpaid seller’s right of stopping the goods in transit in
case of buyer’s insolvency.
5. Right of indemnification (Ss. 222-224): The principal is bound to indemnify agent against
the consequences of all lawful acts done by the agent in exercise of authority conferred on
him.

Example: John, at Singapore, under instructions from Amin at Kolkata, contracts with
Cooper to deliver certain goods to him. Amin does not send the goods to John and Cooper sues
John for breach of contract. John informs Amin of the suit and Amin authorises him to defend
the suit. John defends the suit and is compelled to pay damages and costs and incurs expenses.
Amin is liable to John for such damages, cost and expenses.
Section 223 further provides that agent shall have a right to be indemnified against
consequences of acts done in good faith.

Example: B, at the request of A, sells goods in the possession of A, but which A had no
right to dispose of. B does not know this and hands over the proceeds of the sale to A. Afterwards
C, the true owner of goods, sues B and recovers the value of the goods and costs. A is liable to
indemnify B for what he has been compelled to pay to C and for B’s own expenses, provided
C has acted in good faith and he had no knowledge that the goods did not belong to A.

However, it must be remembered that agent cannot claim indemnification for criminal
act, even though the principal had agreed to do so (s.224).

LOVELY PROFESSIONAL UNIVERSITY 61