BRF- MODULE-2

Indemnity- Definition- Nature of liability of surety- right of surety- discharge of surety

Meaning & definition of guarantee-essentials
Bailment and pledge- definition -essential elements- rights and duties of bailor bailee- finder of lost
goods- Pledge- definition- right and duties of pawner-pawnee-
Law of agency-kinds of agent- rights and duties of agents and principal- creation & termination of
agency- sub and substitute agent- relationship
Indemnity
The term indemnity may be defined as the act to compensate or protect against loss.
Contract of Indemnity (Sec. 124):-
Section 124 of Indian Contract Act 1872 reads as under “A contract by which one party
promises to save the other from loss caused by the conduct of the promisor himself or by
the conduct of any other person, is called a Contract of Indemnity”.
The definition shows that contract of indemnity is a contract in which one person promises
to protect or compensate the other for the loss suffered by him due to the conduct of the
promisor or any other person.
Contract of Indemnity is a special kind of contract and it is a part of General Law of Contract.
Hence it must have all the essentials of a valid contract like agreement, consideration,
capacity, free consent, lawful object, etc..
The two parties involved in a contract of indemnity are:
1. Indemnifier:- The party who gives the indemnity or who promises to compensate the
loss is the indemnifier.
2. Indemnified/Indemnity holder:- The party for whose protection the indemnity is
given or who is protected from loss, is known as Indemnified or Indemnity Holder.
Essentials of valid contract of indemnity.
Contract of Indemnity must satisfy all the essential elements of valid contract. There must
be a promise to save or protect the other party from some loss.
The loss may be due to the conduct of the promisor himself or any other person.
The contract of indemnity may be express or implied.

Rights of indemnity holder

When the indemnity holder is liable to pay damages, then he becomes entitled to recover
the compensation from the indemnifier. The indemnity holder has the right to recover the
following from indemnifier.

 All damages which the indemnity holder was compelled to pay.

 All expenses which the indemnity holder was compelled to pay in bringing or
defending the suit.
 All sum which he paid in compromise of any such suit.
Contract of Guarantee
The term Contract of Guarantee is defined in Sec 126 of ICA, which reads as under “A
contract of guarantee is a contract to perform the promise or to discharge the liability, of
the third person, in case of his default.” A contract of guarantee is incomplete without a
surety.

Contract of guarantee involves the following three parties:

 Surety:- The party who gives the guarantee is known as surety.
 Principal Debtor:- The party on whose behalf the guarantee is given is known as the
principal debtor.
 Creditor:- The party to whom the guarantee is given is known as the creditor.

A surety is a person who gives a guarantee to the creditor that he would make the debt
payment if the principal debtor makes a default

Essential rule of a valid contract of guarantee

The contract of guarantee is a special kind of contract and it should satisfy all the
requirements of a valid contract.
1. The contract of guarantee must be supported by consideration. Something done
for the benefit of not only the surety himself, but also for the principal debtor is
the sufficient consideration for the contract of guarantee.
2. The contract of guarantee must be made by the parties competent to contract.
The creditor and the surety must be competent enough to enter into a valid
contract.
3. It is essential that in the contract of guarantee, there must be someone primarity
liable, other than the surety. The contract of guarantee presupposes the existence
of a liability enforceable by law.
4. The promise to pay must be conditional. The liablity of surety should arise only
when the principle debtor makes a default.
5. There should be no misrepresentation of material facts, and if so it will be invalid.
The guarantee of surety should not be obtained by misrepresentation of facts to
the surety.
6. There must be no concealment of facts to the creditor, and if made so ithe
guarantee becomes invalid. The creditor should disclose to the surety the facts
which are likely to affect surety’s liability.
7. The contract of guarantee may be made oral or in written.
8. The contract of guarantee requires the identity of minds of all the three parties in
respect of the subject matter of the contract.
9. There must be three contracts in the contract of guarantee.
a. Contract between principal debtor and creditor
b. Contract between creditor and surety
c. Contract between principal debtor and surety
Kinds of guarantee
1. Retrospective guarantee:- when a guarantee is given for an existing debt, it is
called retrospective guarantee.
2. Prospective guarantee:- when a guarantee is given for future debt, it is called
prospective guarantee.
3. Specific or Simple guarantee:- the guarantee which is given for a specific
transaction, which extends to a single transaction or debt is called specific or
Simple guarantee. Such guarantee comes to an end as soon as the transaction is
duly performed.
4. Continuing guarantee:- Continuing guarantee is a guarantee which extends to a
series of transactions. Such guarantee doesn’t end on the performance of a single
transaction or discharge of a single debt, but it remains enforceable even for the
subsequent transactions or debts.

Nature of liability of surety(Sec 128)

The nature of liability of surety can be discussed under the following heads.

1. Co-extensive:- Section 128 of ICA1872, provides for surety’s liability which is co-
extensive with the principal debtor’s liability. It means that the surety has the same liability
as the principal debtor. A surety is liable to pay the amount owed to the principal debtor if he
makes a default in payment to the creditor.

2.The liability of surety in certain cases, where the original contract between creditor and
principal debtor is void or voidable, the surety will remain liable as if surety was principal.
For example, in cases where the principal debtor was a minor.

3.The liability of the surety is secondary. The liability of surety to pay arises only on the
default of principal debtor. The primary liability to pay money to creditor is cast upon the
debtor.

4.Proceedings against surety’s mortgaged property:-.A financial corporation cannot take

possession of the surety’s mortgaged property of the guarantor without prior notice. The
corporation also cannot issue any public notice to sell the property without informing the
surety. This is because the surety’s liability is secondary in nature and would arise only when
the principal debtor fails to repay the amount.

5.Death of principal debtor:- In case of the death of the principal debtor, any suit against him
would be void ab initio. However, the surety would not be discharged of his liability to pay
the amount.

6.Surety’s right to limit his liability or make it conditional:-The surety may put a restriction
on the extent of his liability in the agreement. He can expressly declare his guarantee to a
fixed amount and in such a case the surety cannot be liable for any amount beyond the fixed
amount.
The principal debtor owes a greater amount but it is not the responsibility of the surety to be
responsible for even a single rupee more than what was stated in the agreement.

Rights and Discharge of surety

A contract of guarantee shall also satisfy all the necessary conditions or elements of a valid
contract. As per section 127, anything is done or any promise made for the benefit of the
principal debtor provides sufficient consideration to the surety for giving the guarantee to the
creditor.

Rights of a Surety
A surety has the following rights:

1. Rights against the Creditor

As per section 141, a surety is eligible to the benefit of every security which the creditor has against the
principal debtor. This holds true even if at the time of entering into the contract of guarantee the surety
was unaware of the existence of such a security.

Also, when the creditor losses or parts with such security without the consent of the surety, this
discharges the surety to the extent of the value of such security.

2. Rights against the Principal Debtor

Once the surety discharges the debt, he obtains the rights of a creditor against the principal debtor. He can
now sue the principal debtor for the amount of debt paid by him to the creditor due to the default of the
principal debtor.

In a case where the principal debtor on discovering that the debt has become due, starts disposing of his
properties in order to prevent seizure by the surety, the surety can compel the debtor to pay the debt and
discharge him from his liability to pay.

3. Surety’s rights against the co-sureties

When a surety pays more than his share to the creditor, he has a right of contribution from the co-sureties,
who are equally liable to pay. For example, Anthony, Barkha, and Chaya are the co-sureties to David for
a sum of ₹30000 lent to Erwin who made default in payment.

Thus, Anthony, Barkha, and Chaya are liable to pay ₹10000 each as between them. So, in this case, if
anyone of them pays more than ₹10000, he can claim the excess from the other two co-sureties so as to
reduce his payment to ₹10000 only. However, if one of the co-sureties becomes insolvent, the other co-
sureties shall contribute his share equally.
Discharge of a Surety’s Liability(Sec.130 – 144)
Discharge of surety’s liability means that the liabilities of the surety have come to an end and
he is no longer under any obligation. The circumstances in which the surety is discharged
from the liability are provided under Sections 130-144 of the ICA

A surety is considered as a favourable debtor and the liabilitity of a surety can be discharged or
released.

I. Discharge by Revocation

1. Revocation by Notice (Sec.130) :- Section 130 of ICA states that the surety, by giving a
notice to the creditor, can revoke a continuing guarantee for future transactions. The surety
should clearly state it in the notice. However, a specified guarantee for the liability already
arisen cannot be revoked.

2. Revocation by Death:- Section 131 of ICA states that in case of the the death of surety, he is
released from the liability and his legal heirs will not be made liable for the transactions on
behalf of the surety either continuing or in future ,unless it is provided so in the contract of
guarantee.

II. Discharge by Conduct

1. Variation in terms of contract:- Section 133 of ICA provides for the discharge of surety’s
liability if any variation in the terms of contract of guarantee entered upon by creditor
and principal debtor have been brought without informing or consulting the surety.
2. Discharge or Release of Principal Debtor:- Section134 of ICA incorporates a discharge
of surety, if the creditor releases or discharges the primary liability of the principal
debtor. As the surety only has a secondary liability, if primary liability is released,
surety’s liability also automatically discharges.
3. Compounding by creditor with Principal Debtor:-Section 135 of ICA says that when
the creditor makes an arrangement for composition or promises to give time or not sue
the principal debtor without surety’s consent, the surety will be discharged.
4. Impaired surety’s remedies:- Section 139 of ICA discharges the surety’s liability if the
creditor has done any act or omission which is inconsistent with the rights of the surety
5. Loss of Security:- Section 141 of ICA provides that if the creditor losses or parts with
any security without the consent of the surety, then the surety will be discharged from
his liability for the value of the security or parted with or lost.
III. Discharge of surety’s liability by Invalidation of a Contract

1. Guarantee obtained by misrepresentation on part of the creditor under Section 142 of

ICA.
 2. Guarantee obtained by concealing a material fact becomes invalid (Section 143 of ICA)
3. Default on part of the co-sureties results in the invalidation of the contract and the surety
will be discharged from the liability.(Section 144 of ICA)

Bailment & Pledge

Definition of Bailment

A contract in which the goods are handed over by one party to another party for a specific
reason, which is expressed or implied for a short period. The two parties involved in the
contract of bailment are the bailor and the bailee.

The person who delivers the goods is termed as Bailor whereas the receiver of the goods is
termed as Bailee.

The delivery of goods can be done in three ways: Actual Delivery, Symbolic Delivery,
Constructive Delivery. The Bailment is divided into two categories:

 Gratuitous Bailment – Either for the sole benefit of Bailor or Bailee.

 Non-gratuitous Bailment – For the Mutual Benefit of both the parties.

Definition of Pledge

The pledge is a variety of bailment in which goods are transferred from one party to another
party as security for the payment against debts owed by him.

The person who delivers the goods is known as Pawnor whereas the person who receivers
goods is known as Pawnee.

Essential features of a valid bailment

1. The delivery of possession: - The essential and important element of the bailment is
that the possession of goods must be delivered by the bailor to the bailee. Only
possession of goods transfers from bailor to bailee, not the ownership.
2. The delivery of goods should be on the basis of a contract: - The delivery of goods to
the bailee should be on the basis of some contract because the bailment is always
created on the basis of a contract. The contract may be expressed or implied.
3. The delivery should be for a specific purpose:- The goods should be delivered by the
bailor to the bailee for a specific purpose.
4. The delivery should be upon a condition to return the goods. It is agreed between the
bailor and the bailee that as soon as the purpose is achieved, the goods shall be
returned or disposed of according to the direction of the bailor.

Essential features of a valid pledge

1. The delivery of possession: - The essential and important element of a valid pledge is
that the possession of goods must be delivered by the pledger to the pledgee. Only
 possession of goods transfers from one person to the other, not the ownership which
remains with the pledger.

2. The delivery of goods should be on the basis of a contract: - For a valid pledge, the
delivery of goods should be made with an intention to create a pledge.

3. The delivery should be for a specific purpose of security:- The goods should be
delivered by the pawnor to the pawnee as a security for the payment of a loan or for the
fulfilment of an obligation.

4. The delivery should be upon a condition to return the goods. It is agreed that the
goods shall be returned to the pawnor when such loan is repaid or the promise is fulfilled.

Differences Between Bailment and Pledge

The following are the major differences between Bailment and Pledge

BASIS FOR
BAILMENT PLEDGE
COMPARISON

Meaning When the goods are temporarily handed over When the goods are delivered to act as security
from one person to another person for a specific against the debt owed by one person to another
purpose, it is known as bailment. person, it is known as the pledge.

Defined in Section 148 of the Indian Contract Act, 1872. Section 172 of the Indian Contract Act, 1872.

Parties The person who delivers the goods is known as The person who delivers the goods is known as
the Bailor while the person to whom the goods Pawnor while the person to whom the goods are
are delivered is known as Bailee. delivered is known as Pawnee.

Consideration May or may not be present. Always present.

Right to sell the The party whom goods are being delivered has no The party whom goods are being delivered as
goods right to sell the goods. security has the right to sell the goods if the party
who delivers the goods fails to pay the debt.

Use of Goods The party whom goods are being delivered can The party whom goods are being delivered has no
use the goods only, for the specified purpose. right to use the goods.

Purpose Safe keeping or repairs, etc. As security against payment of debt.

Duties and Rights of a Bailor

 Rights of Bailor Duties of Bailor
1 Bailor has the right to compensate against the Bailor is required to disclose any
unauthorized use if the bailee uses the goods fault in the goods bailed during the
for the purpose that wasn’t authorised under agreement.
the contract
2 Bailor has the right to terminate the contract , He is required to pay the necessary
if bailee does any act with regard to the goods expenses in the case of gratuitous
bailed, inconsistent with the conditions of the bailment and extraordinary
bailment. expenses, if any, in the case of
non-gratuitous bailment.
3 The bailor has a right to claim for The bailor must indemnify the loss
any loss caused to him in case if incurred by the bailee.
bailee fails to fulfill his duty to take
care of the goods.
4 Bailor has a right to take goods Bailor also owes a duty to receive
back from the bailee on the expiry the goods back, he cannot deny
of the contract or whenever he taking the goods if he does so then
desires so. he is liable to compensate the
bailee.
5 Bailor is entitled to receive any
profits earned by the bailee during
the agreement.
6 Bailor is entitled to claim damages
in case goods have been mixed by
the bailee with his own goods.

Rights of Bailee Duties of Bailee

1 If a bailee has been given defected Bailee owes a duty to take proper
goods, then in such case bailee has care of the goods given to him by the
a right to get compensation from the bailor.
bailor for the defected items.
2 He has a right to claim contribution He should act according to the act of
for the expenses. bailment otherwise the contract can
become voidable at the option of the
bailor
3 He has a right of indemnity for He cannot deny returning the goods
making involvement in Bailment back to the bailor or transfer of the
contract. title to the bailor.
4 Bailee can return the goods to any of It is the duty of the bailee to return
the owners in case there are joint the goods bailed as the time and
owner for the goods. purpose of the bailment completes.
5 If required, Bailee has a right to Bailee is also entitled to deliver the
approach the Court of law profit, or any increase that occurred
 in the bailed goods to the bailor.
6 It is the bailee’s responsibility to use
the goods only for the authorised
purpose under a contract. If it is
found that the goods are used for
unauthorised purposes, the entire
contract can be declared void by the
bailor

Rights and Duties of Pawnor and Pawnee

Rights of Pawnor Right of Pawnee

1 1. Defaulting pawnor’s right to If the pawnor makes default in
redeem. payment of the debt, or performance,
The right to redeem clearly at a stipulated time, of the promise, in
continues up to the time on the respect of which the goods were
expiry of which the pawnee has pledged, the pawnee may bring a suit
against the pawnor upon the debt or
notified that the goods would be
promise, and retain the goods pledged
sold. But it does not extinguish only
as a collateral security; or he may sell
with the expiry of time, but
the thing pledged, on giving the
continues until the actual sale of
pawnor reasonable notice for sale.
goods is made. Pawnor may redeem
the goods at any subsequent time
before the actual sale of them.

2 Legal heir’s right to redeem Right of Lien- Section 173 entitles the
pawnee with a right to retain goods
If a pawnor dies, his/her legal heir can pleged until he is paid back the debt,
redeem the goods on his behalf. interest and any other expenses
incurred for maintenance of such good.

Money due under the pledge

Interest to be paid on debt

Necessary expenses for preservation of

goods.

3  Right to claim for damages Pawnee has a right to sell the goods after
and loss on the ground of giving reasonable notice and time to
conversion. pawnor.
 4  Preservation and maintenance of Right of retainer for subsequent
goods- It is a right of the advances- Section 174 provides for a
pledger/pawnor that his goods presumption that if there are any
subsequent advances made by pawnee
are safely stored and maintained.
to pawnor, it will be included in the
original debt only. Therefore, the
pawnee has the right to retain the
goods until subsequent advances are
paid.

5  Right to get increase in the Right to extra ordinary expenses- The

goods- It is the right of the pawnee holds the right to recover any
pledger to get back the good extraordinary expenses incurred by
him in the preservation of pledged
pledged along with the increase
goods from the pawnor under Section
in the good, if any. 175 of Indian Contract Act.[7]

Duties of Pawnor Duties of Pawnee

1 1. The pawnor is liable to 1. Duty to take reasonable care
pay the debt or perform of the goods pledged.
the specified promise. 2. Duty to return the goods upon
2. To compensate the
payment of debt or
pawnee for any
expenses incurred by performance of promise.
him for preserving the 3. Duty to not mix his own goods
goods pledged. with the pledged goods.
3. To disclose the defaults 4. Duty not to act in anyway
that may put the which is inconsistent with the
pawnee under contract of pledge.
extraordinary risks.
5. Duty to not make
4. The pawnor must
compensate the unauthorized use of goods.
pawnee, if loss is caused 6. Duty to return accretion of
to him due to defect in goods if any.
pawnor’s title of goods.

Law of Agency
Agency is the legal status of a person to act in the capacity of another.
In other words, agency is a relationship which arises where a person known as the
agent has the express or implied authority to act in the capacity of another person
known as the principal, and such act has the same effect as though it were in fact
performed by the principal.

There are basically two parties in an agency relationship which are the Principal and
the Agent.

The Principal: the principal is the party on whose behalf the agent carries out a
given duty.

The Agent: an agent is the party employed, engaged or contracted by the principal
to act for him in his capacity

Agency law is concerned with any "principal"-"agent" relationship; a

relationship in which one person has legal authority to act for another.
The relationships generally associated with agency law include guardian-
ward, executor or administrator-decedent, and employer-employee.

The law of agency is when an agent is authorized to act on the behalf of the principal
and to create a legal relationship with a third party. An agent is a person employed by
principal in dealings and act on the behalf of principal with third persons. Principal is the
person for who is represented by the agent.

Creation of Agency
An agency can be created by:

Direct (express) appointment– The standard form of creating an agency is by direct appointment.
When a person, in writing or speech appoints another person as his agent, an agency is created
between the two.

Implication– When an agent is not directly appointed but his appointment can be inferred from the
circumstances, an agency by implication is created.

Necessity– In a situation of necessity, one person can act on behalf of another to save the person from
any loss or damage, without expressly being appointed as an agent. This creates an agency out of
necessity.

Estoppel– An agency can also be created by estoppel. In a situation where one person behaves in
such a manner in front of a third person, as to make someone believe he is an authorized agent on
behalf of someone, an agency by estoppel is created.

Ratification– When an act of a person, who acted as another person’s agent (on his behalf) without
his knowledge is later ratified by that person, this creates an agency by ratification between the two.
Types of Agent
1. Mercantile Agent: Mercantile agency is a type which creates a relationship
where the agent id authorized to makes sales on behalf of the principal in the
customary course of business. Buying goods from a mercantile agent transfers
ownership and title to the purchaser as tough it was in fact purchased from
the original owner himself, since a mercantile agent has the full authority of
the owner, he can therefore sell in his name.
2. Sole Agent: Sole agent is a distinct type of agency which implies that there is
only one person through which the transaction with the principal can be
perfected. Therefore, even if there are other sub-agents or other unauthorized
or self-acclaimed agents, the transaction must still be perfected through the
sole agent and his commission be paid thereon.
3. Estate Agent: an Estate Agent engages in buying and selling of landed
properties which includes lands, houses, and may in fact extend to the
marketing and selling of home use chattels. An estate agent is paid a
commission upon successful sales made.
4. Broker: A broker is an agent who negotiates agreement between a party and
another (the principal). A broker need not be in physical possession of the
goods which is the subject matter of the contract. A broker is paid a
commission known as brokerage.
5. Banker: A bank or banker becomes an agent of the customer in certain
relations. For instance, where a banker receives instruction from the customer
of which he is obliged to perform; such as paying in deposits, paying an
amount specified in a cheque in favour of the payee.
6. Auctioneer: An auctioneer is an agent employed for the purpose of selling
goods at auction sales. An auctioneer is required to be licensed. The law
imposes on him not to make sales below the reserved price and also not make
credit sales.
7. Del Credere Agent: A del credere agent undertakes to indemnify the
principal upon the breach of payment by a third party. A del credere agent can
be likened to a guarantor. He guarantees that upon default by a specific third
party, he is to be bound. A del credere agent is usually paid a commission
known as del credere commission.
8. Partners: In a partnership, each of the partners is regarded as the agent of
the other partners.

9. Dual agency refers to a situation in which a broker represents both a seller and buyer
at the same time. This does not constitute a conflict of interest as long as both parties
are aware of and consent to the arrangement. The dual agent is required to keep
information about price, motivation or terms confidential unless expressly instructed to
inform the other party about this information.
10. A sub-agency involves a situation where a potential buyer would like to look at a
property and his regular agent is unavailable. Sub-Agent-An agent appointed by
an agent. A sub-agent will walk the buyer through the property and provide him
customer service as if he were his own client. The difference is that a sub-agent is not
 permitted to provide the buyer with any information or disclosures that could negatively
impact the seller.
11. Substituted agent:- When a person, in the capacity of an agent, is
asked to name someone for a certain task, the person who is named
does not become a sub-agent to the Principal, but a substituted agent.
12. Special Agent- Agent appointed to do a singular specific act.
13. General Agent- Agent appointed to do all acts relating to a specific job.
14. Co-Agent- Agents together appointed to do an act jointly.
15. Factor- An agent who is remunerated by a commission (one who looks
like the apparent owner of the things concerned)

Termination of Agency
An agency can be terminated or is terminated in 5 different ways:
1. When the agent’s authority is revoked by the Principal
2. When the agent renounces the business of the agency
3. When the business of the agency is completed
4. When either of the parties dies or becomes mentally disabled
5. When the Principal is adjudicated an insolvent

Revocation of Agent’s authority

There are certain rules regarding the revocation of an agent’s authority.

1. It can be revoked any time before the authority has been exercised.
2. If according to the terms of the contract between the two, the
agency has to continue upto a certain time, any prior revocation by
the Principal shall be compensated for, to the agent.
3. The termination does not take effect before it has been
communicated to the agent.
4. Termination of the authority of an agent terminates the authority of
all the sub-agents under him.

Agent’s duties to Principal

An agent has 6 duties towards his Principal:

1. He has to conduct the business of the Principal according to the

directions of the Principal.
 2. An agent is bound to conduct the business he is supposed to
conduct with as much skill as a person on his position ordinarily
holds.
3. An agent is supposed to show the relevant accounts to the Principal
as and when the Principal demands.
4. An agent has the duty to communicate any difficulty whatsoever he
may come across while doing the Principal’s business. He is
supposed to perform due diligence in this regard.
5. If any material fact has been concealed or the business is not
carried out in the manner that the Principal directed, the Principal
can repudiate the contract between them.
6. If the agent carries out the business in the manner he wanted to
perform it, rather than on the directions of the Principal, the
Principal may claim from the agent any benefit he may have
achieved through doing so.

Principal’s duties to Agent

The Principal has 4 duties towards the Agent:

1. The Principal is bound to indemnify the agent against any lawful acts
done by him in the exercise of his authority as an agent.
2. The Principal is bound to indemnify the agent against any act done
by him in good faith, even if it ended up violating the rights of third
parties.
3. The Principal is not liable to the agent if the act that is delegated is
criminal in nature. The agent will also in no circumstances be
indemnified against criminal acts.
4. The Principal must make compensation to his agent if he causes any
injury to him because of his own competence or lack of skill.

Rights of an Agent
An agent has the following 5 rights:

1. Right of retainer– An agent has the right to retain any

remuneration or expenses incurred by him while conducting the
Principal’s business.
2. Right to remuneration– An agent, when he has wholly carried out
the business of the agency has the right to be remunerated of any
expenses suffered by him while conducting the business.
 3. Right of Lien on Principal’s property- The agent has the right to
hold (keep with himself) any movable or immovable property of the
Principal until his due remuneration is paid to him by the Principal.
4. Right to be Indemnified– The agent has the right to be
indemnified against all the lawful acts done by him during the
course of conducting the Principal’s business.
5. Right to Compensation– The Agent has the right to be
compensated for any injury or loss suffered by him due to the lack
of skill and competency of the Principal.

Liability of Principal for Agent’s Fraud or Misrepresentation

According to Section 238, The Principal is liable for any fraud or misrepresentation made by his agent
during the course of his business, as if the fraud or misrepresentation was done by the Principal
himself.