CONTRACT II-AGENCY

S.No. Case Name Citation Compiled by

1. Pestonji Bhicaji v. Raviji Javerchand AIR 1933 Sind235 Garima Upadhaya
2. Barwick v. English Joint Stock Bank (1867) LR 2 Exch Garima Upadhaya
259
3. United Commercial Bank v. Hem AIR 1990 SC 1329 Garima Upadhaya
Chandra Sarkar
4. Polhill v. Walter (1832)3 B & Ad.114 Kuldeep Bishnoi
5. Lloyed v. Grace Smith & Co. (1912) AC 716 Kuldeep Bishnoi
6. Debenham v. Mellon (1880) 6 AC 24 Kuldeep Bishnoi
7. Collen v. Wright (1857) E & B 647 Manav Sharma
8. Great Northern Railway v. Swaflied (1874) LR 9 Exch Manav Sharma
132
9. Sims & Co. v. Midland Rly Co. (1913) 1 KB 103 Manav Sharma
10. Virender Khullar v. American AIR 2016 SC Prakshi Singh
Consolidation Services Ltd. & Others (Civil)2381; AIR
2016 SC 3798
11. Bolton Partners v. Lambert (1889) 41 Ch D 295 Prakshi Singh
12. Jayabharati Corp v. SUPNSNR AIR 1992 SC 596 Prakshi Singh
Nadar
13. Marine Container Services South v. [1998] 3 SCC 247 Ritansha Singhal
Go Go Garments
14. Keighley, Maxted & Co. v. Durant (1901) A.C. 240 Ritansha Singhal
15. Attwood v. Munnings (1827) 7 B & C 278 Ritansha Singhal
16. Minsk Off Equities v. American 94 Civ. 967 (RPP) Sadgi Gaurav
Express
17. Kelner v. Baxter (1866) Lr 2 CP 174 Sadgi Gaurav
18. Reid v. Rigby (1894) 2 QB 40 Sadgi Gaurav
19. Valapad Co-operatives Stores Ltd. v. AIR 1964 Ker 176 Saharshrarchi Uma Pandey
Shrinivas Iyer
20. Shephard v. Catwright (1953) Ch 728 Saharshrarchi Uma Pandey
21. Jacob v. Morris (1902) 1 Ch 816 Saharshrarchi Uma Pandey
 22. Harshad J. Shah v. LIC of India AIR 1997 SC 2459 Shekhar Sansanwal
23. Beaven v. Webb (1901) 2 Ch 59 Shekhar Sansanwal
24. Union of India v. Chinoy Chablani AIR 1982 Cal 365 Shekhar Sansanwal
25. P.K. Singh v. Life Insurance 2010 SCC OnLine Trisha Jain
Cooperation Del 1638; (2010)
169 DLT 369
26. Lakmi Narayan Ram Gopal & Sons AIR 1954 SC 364; Trisha Jain
v. Government of Hyderabad (1955) 1 SCR 393;
(1954) 25 ITR 449

CASE COMPILATION

Name of the
S.No. Citation Topic Ratio
Case
The question for consideration
was whether payment of
premium of life insurance
policy by the insured to agent
of Life Insurance Corporation
of India could be regarded as
payment to the insurer so as to
constitute discharge of liability
Harshad J.
Implied and Express of the insured. Holding that the
Shah and
Authority of Agent, agent had no authority to
Another v.
1) AIR 1997 SC 2459 Doctrine of Apparent collect premium, it was held
L.I.C of India
Authority that there was nothing in the
and others
S.186,187,188,237. case to show that LIC had, by
its conduct, induced
policyholders to believe that
agents were authorised to
receive payments on behalf of
LIC, such a case being neither
pleaded, nor supported with
any material on record.

The Case revolves around the

Whether an Agent can
Interpretation of Section
personally enforce a
Union of India 230(3) and whether the
contract or not?
v. Chinoy defendant Agents of the
2) AIR 1982 Cal 365 Section 230(3) along with
Chablani Company registered in USSR
Section 233 and Section
can be sued or not. Ordinarily
234
the Agent can neither
personally enforce a contract
 nor can he be held liable in
case of third party however
under section 230 he can be
held liable. The expression
(principal…cannot be sued) in
Section 230(3) has a wider
amplitude and is not restricted
only to India and would cover
the cases throughout the world.

The issue in the case was

whether an agent of a partner
in the partnership firm has the
same right as the partner to
inspect the accounts book. The
court held that the right could
Extent of Agent’s be exercised provided there
WEBB v.
Authority and when was no reasonable objection.
3) BEAVAN (1883) 11 QBD 609
agents cannot delegate. Whatever a person has
S. 186, 188, and 190 capacity to do themselves they
may do by an agent. A person
entitled to inspect accounts is
prima facie entitled to employ
an agent or expert to inspect at
his instance.

In a course of action directed

by the principal, if an agent
commits a fraud then the
principal would be held liable
Vicarious liability of the for the same. Though the
Barwick v. principal for fraudulent principal had not directed such
4) English Joint (1867)LR(2)Exch259 actions of his agent during fraudulent action but he had
Stock Bank the directed course of put the agent in a situation
action where he would be
representing the principal.
Therefore, the principal will be
held liable for any acts or
consequences during the same.
The case has dealt with six
major issues regarding agent’s
lien on principal’s property.
The agent must have lawful
Pestonji possession of the good and no
Section 221 – Agent’s lien
5) Bhicaji v. Ravji AIR1933Sind235 arrangement should be
on principal’s property
Javerchand inconsistent with exercise of
his lien. The property must
belong to the principal. It
should be received by the agent
in the capacity of an agent.
 Agent’s lien does not give him
unauthorized authority over
principal’s property. He can
only possess them until his
dues are paid. If any kind of
unlawful authority is exercised,
the principal may use it as a
defence to revoke such lien.
The issue in this case was
regarding the question of the
bank being an agent or a
bailee. It was held by the Apex
Court that in a case where a
person has no authority to
change contractual or legal
Section 148 – “Bailment”, relationship of parties, then
United
“Bailor” and “Bailee” that particular person acts as a
Commercial
6) AIR1990SC1329 defined bailee and not an agent.
Bank v. Hem
Section 182 – “Agent” Furthermore, the bank, being
Chandra Sarkar
and “Principal” defined the bailee, had the duty to
deliver goods to the right party.
Even if it was negligently
delivered to a wrong person, it
was the duty of the bank
(bailee) to ensure the delivery
of the goods to the right
person.
A person, who induces another
to contract with him as the
agent of a third party by an
unqualified assertion of his
being authorized to act as such
Section 235. Liability of
Collen v. (1857) E & B 647 agent, is answerable to the
7) pretended agent
Wright person who so contracts for
any damages which he may
sustain by reason of the
assertion of authority being
untrue.

Great Northern Doctrine of agency of The plaintiff's claim succeeded

(1874) LR 9 Exch
8) Railway v. necessity to cases even though this involved the
132
Swaflied concerning the carriage of extension of the doctrine of
 goods by land. agency of necessity to include
carriers of goods by land.
There was an agency of
necessity because the plaintiff
was found to have had no
choice but to arrange for the
proper care of the horse. The
doctrine of agency of necessity
was then extended beyond
cases involving carriage of
goods to other cases in which
the plaintiff had been forced by
an emergency to act beyond his
or her existing authority.
The doctrine as to sale by an
agent of necessity applied to a
carrier by land as well as by
sea provided that the necessary
Sims & Co v. Agent exceeding his
condition existed, namely, that
9) Midland Rly (1913) 1 KB 103 authority in an
there was a real necessity for
Co emergency (Sec. 189)
the sale, and that it was
practically impossible to get
the owner's instructions in time
as to what should be done.
Reliance was laid upon the
third clause of the
Marine presumptions to the contrary in
Container Section 230, that is to say that

10) Services South [1998] 3 SCC 247 Section 230 clause 3 an agent is bound by a contract
v. Go Go entered into by his principal
Garments who, though disclosed, cannot
be sued. Here the principle is
“some company in Taiwan
 situated far outside the
jurisdiction of the consumer
courts in India”.
The SC did not agree with this
view that the company could
not be held liable therefore the
principle could be sued and
thus the plea was granted in
favour of the respondent.

The agent Robert was

authorised by the appellant
Keighley to buy wheat at the
price authorised by him. But
the agent bought the wheat at a
price higher than that from the
seller Durant but he failed to
disclose that he was appointed
as by Keighley Maxted &Co.
Keighley
Ratification of agent’s They did not buy wheat from
Maxted & Co.
11) [1901] A.C. 240 contract by undisclosed him so he had to sell them to
v. Durant
principle others at a lower price so he
sued the company for the
losses. The House of Lords
held that the company is not to
be held liable to Durant since
there is no ratification as there
is no disclosure of agency
made by Robert during the
time of contract.

Attwood v. The principle is not liable The principle while going

12) [1827] 7 B&C 278
Munnings on behalf of the agent if abroad appointed his partner as
 the business being well as agent to carry on his
conducted is different business and also his wife to
from that authorised by accept the bills on his behalf
him to do. for his personal business. He
was not held liable when his
wife accepted those bills on his
behalf of the business which
his agent was carrying but was
different from his personal
business.
The secretary of the society
was entrusted with funds for
the purpose of purchasing
goods; the appellants claimed
that he had no authority to
purchase the goods on credit
and that he has
misappropriated the funds
Valapad Co- given to him and thus the
Operative appellant was not liable to pay
Liability of a secretary for
Stores Limited for the goods he had purchased
13) AIR 1964 Ker 176 credit transactions even if
v. Srinivasa for credit.
he had enough cash
Iyer It was held that the person
having the duty to carry on the
business of the store of the co-
operative society is presumed
to have an authority to
purchase goods on credit even
if he had enough funds in the
form of cash to conduct the
transaction.

14) Jacob v. Morris [1902] 1Ch 816 The principle is not liable The plaintiff was a tobacco
for the acts of the agents if merchant in Melbourne, had a
he does them for his firm in London also while
personal purposes being absent in London he
appointed an agent with the
power of attorney and
describing him as of
Melbourne as a tobacco
merchant trading in London.
Therefore, the agent acting
under the said powers obtained
a loan from the defendants who
have had many dealings with
the firm before so they upon
trusting him without reading
the powers entrusted him with
the loan which he subsequently
used for his own purposes. The
plaintiff did not know about it
and later brought an action
against the defendants to stop
them from negotiating the bills
on the grounds that they had
been made without his
authority.
The court held that the agent
had only the power to purchase
and not the power to borrow.
The loss of the loan was on the
part of the mistake by the
defendants as they did not as
they neglected to examine the
power vested in him.
 A minor cannot appoint an
agent for him by any means
even if it be as a power of
attorney or any other means. If
Shephard v. he does so any such
A minor cannot appoint
15) Cartwright [1953] Ch 728 appointment is void but also
an agent
everything conducted by the
agent on the minor’s behalf is
also void and he will be
incapable to ratify.

Where a contract is signed by

one who professes to be
signing “as agent,” but who
has no principal existing at the
Ratification of contract time, the contract would be
16) Kelner v
(1866) LR 2 CP 174 and liability of an agent wholly inoperative unless
Baxter
who has no principle. binding upon the person who
signed I and a stranger cannot
by a subsequent ratification
relieve him from that liability.

It was held the plaintiff's right

Liability of Principal -
to recover money borrowed
Unauthorized Borrowing
without authority and paid into
by Agent - Money applied
the defendant's account is not
17) for Benefit of Principal -
Reid v. Rigby [1894] 2 QB 40 affected by the fact that the
Claim by Lender for
money was borrowed by the
Money received - Cheque
agent to replace money which
signed by Procuration -
he had wrongfully abstracted.
Limited Authority to sign
 A principal may be estopped
from denying apparent
authority if (1) the principal's
intentional or negligent acts,
Apparent authority and including acts of omission,
Minsoff
principal may be stopped created an appearance of
18) Equities v.
94 Civ. 967 (RPP) from denying apparent authority in the agent, (2) on
American
authority. which a third party reasonably
Esxpress
and in good faith relied, and
(3) such reliance resulted in a
detrimental change in position
on the part of the third party.

The Supreme Court held that

Mzere preparation of a list of
employees whose renewal
premium is supposed to be
covered by the cheque of the
PA, cannot amount to
collection of the premium
amount itself. If, in fact, the
agent had no role to play in
terms of making adjustments
of premium collected under the
P. K Singh v. Agent of LIC eligible to Scheme, the burden lay on the
Life Insurance 2010 SCC OnLine collect premium oh behalf LIC to show exactly how the
of the corporation or not; Petitioners played any role in
19) Corporation of Del 1638; (2010) 169 Sec 238 charged against such adjustment.
India DLT 369 the Agent- Further, the proviso to Rule
Misrepresentation and 16(1) of Agency rules
fraud mandates that “the agent shall
be given a reasonable
opportunity to show cause
against such termination”. In
the present case, however, the
show cause notice does not
give complete details.
There is a failure on the part of
the LIC to comply with the
principles of natural justice in
the present cases in not
furnishing to each of the
 Petitioners the detailed
documentation on the basis of
which it conducted inquiries
and came to the conclusion that
they had committed grave
misconduct. Each of the
Petitioners were therefore
denied a reasonable
opportunity of defending
themselves in response to the
show cause notices issued to
them. There has been a
violation of the mandatory
requirement of the proviso to
Rule 16 (1) of the Agents
Rules which is fatal to the
impugned orders of
termination.

The Supreme court in this case

underlined the differences
between “Agent”, “Servant”,
and an “Independent
Contractor” as stated below:
 Servant: A servant acts
under the direct control
and supervision of his
master and is bound to
conform to all
reasonable orders given
Laxmi Narayan to him in the course of
Difference Between agent, his work.
Ram Gopal &
AIR 1954 SC 364; servant and independent  Independent
Sons Ltd. v. contractor. Contractor: He/she is
20) (1955) 1 SCR 393; entirely independent of
Governmnet of
(1954) 25 ITR 449 Relation between Agent- any control or
Hyderabad Principal and Master- interference and merely
Servant undertakes to produce a
result, employing his
own means to produce
the result.
 Agent: an agent is
bound to exercise his
authority in accordance
with all the lawful
instruction which may
be given to him from
time to time by his
principle; is not subject
in its exercise to the
 direct control or
supervision of the
principle.

Relation between Agent-

Principal and Master-
Servant is: “A principal has a
right to direct what work a
agent has to do: but a master
has the further right how the
work has to be done”
Respondent agent falsely
communicating to the appellant
principal that goods had been
purchased for him but later
turning round stating that
goods in fact could not be
Jayabharathi purchased as the delivery was
Corpn. V. Sn. dependent on the third party
21)
P. N. Sn. AIR1992SC596 Section 212 which in turn was dependent
Rajesekara upon the on yet another party.
Nadar It was held by the court that
respondent committed gross
neglect and misconduct in
misinforming the appellant as
his latter statement was
afterthought.
Held, since R-1 was simply
acting as an agent of the
consignee, as such, in view of
Virendra
Section 230 of the Indian
Khullar V.
22) Contract Act, 1872, it was not
American AIR2016SC3798 Section 230
personally liable to enforce the
Consolidation
contract the contract entered
Services Ltd.
between its principal and
appellants.

23) It was held by the court that an

Bolton Partners 41 Ch.D. 295 Subsequent ratification is unauthorised acceptance by an
V. Lambert equivalent to prior assumed agent in the name of
authority. the person to whom an offer
was made prevented the
offeror from withdrawing.