Question 5 (b)

When an agent is personally liable to third parties

7 marks

Time to write
About 14 minutes

From an older CBCS paper

Question

Question 5 (b) · 7 marks

State the circumstances in which, for the acts done during the course of agency, an agent is personally liable to third parties. Give suitable examples.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

14 minfor 7 marks

Read from the question

  • State…Give…2 asks, each with its own marks below. Answer both.
  • suitable examplesExamples are asked for: one short example with each point.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 General rule 2 marks 3 min
  3. 2 Exceptions with examples 5 marks 9 min
  4. Check: every ask answered, key terms underlined 1 min

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 14 minutes for 7 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

General rule. In the absence of a contract to the contrary, an agent who contracts for his principal can neither enforce that contract himself nor be held personally bound by it (s. 230). The contract is the principal's.

Exceptions, in which the agent is personally liable:

  1. Foreign principal: he buys or sells goods for a merchant living abroad. Example: a Mumbai buying agent who orders textiles from a Surat mill for a trader based in Dubai can be sued by the mill for the price.
  2. Undisclosed principal: he does not reveal his principal's name. Example: a broker who books a banquet hall "for a client" without naming the client is answerable to the hall owner if the booking fee is unpaid.
  3. Principal who cannot be sued: the principal, though named, cannot be sued. Example: an agent who buys a laptop for a fifteen-year-old principal is presumed to be personally liable to the seller; that may not follow if the seller already knew the principal was a minor.
  4. Pretended agent (s. 235): he claims to act for someone who has not authorised him, and that person disowns the act. Example: a man who signs a supply order "for ABC Traders" without ABC's authority must compensate the supplier when ABC refuses the goods.
  5. Agent exceeding his authority: he leads the other party to believe he has authority he does not have, and is liable for breach of that implied warranty. Example: an agent authorised to sell a car for at least ₹4 lakh who signs a sale at ₹3.5 lakh, presenting it as within his authority, answers to the buyer when the owner refuses to complete. Where the agent is personally liable, the person dealing with him may hold the agent, the principal, or both liable (s. 233).

Where the 7 marks sit

#ComponentMarks
1General rule2
2Exceptions with examples5
Total7
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