-An article by Lavanya Goinka
An “agent” is defined in Section 182 of the Indian Contract Act of 1872 as a person hired to perform any act for another or to represent another in interactions with third parties. The “principal” is the person for whom such an act is performed or who is represented in such a way. “Every person who acts for another is not an agent,” Ramaswami J of the Madras High Court explained in the case of P. Krishna Bhatta v Mundila Ganapathi Bhatta. It is only when he represents the other in business negotiations, i.e. when contractual responsibilities between the other and third parties are created, changed, or cancelled.
An agent is a person engaged by a contract agency to establish a relationship between his principal and the agent. Unless the contract clearly indicates otherwise, the agent cannot directly enforce the contract and is not personally liable for it. The personal liability of agents will be discussed in this article.
Chapter 10 of the Indian Contracts Act, 1872, deals with the agency, and it states that:
A principal’s agent cannot personally enforce or be obligated by contracts on behalf of the principle, according to Section 230.
The rights of parties to a contract made by an unnamed agent are discussed in Section 231. If an agent makes a contract with someone who does not know or has reason to suspect that he is an agent, his principal may demand that the contract be fulfilled; however, the other contracting party has the same rights against the principal as he would have against the agent if the agent were the principal.
The liability of a fictitious agent is discussed in Section 235. A person falsely portraying himself as an authorised agent of another and inducing a third party to deal with him as such an agent is required to reimburse the other for any loss or harm he has incurred as a result of such dealing if his supposed employer does not validate his activities.
”A person who entered into a contract in the position of an agent is not authorised to claim its completion if he was acting on his own behalf,” says Section 236 if a person falsely contracting as an agent is not entitled to performance.
The Act specifies the scope of an agent’s authority under Section 188. An agent with the authority to perform an act has the authority to do everything lawful that is required to perform that act.
For an agent having the power to carry on a business, any authorised thing essential for the purpose of conducting such a business, or usually done in the course of such a business, is permissible.
Illustrations
A is hired by B, who lives in London, to recover a loan owed to him in Bombay. A may take whatever legal action is necessary to recover the debt, including granting a lawful discharge in the process.
As we’ve seen, the main principle of agency is that the agent acts on behalf of his principal and thus is unable to directly enforce the contract. He is also not personally responsible for any of the actions. Unless a contract specifies otherwise,
An agent is not personally liable for the contracts he signs on his principal’s behalf. Because an agent is merely a conduit between his principal and a third party, he cannot, in most situations, personally enforce or be held personally liable for contracts entered into on his principal’s behalf unless there is a formal agreement to the contrary.
However, an agent is personally liable in the following situations:
1.When a person signs a contract with an agent, he may state explicitly that if the contract is broken, he will hold the agent personally liable. The agent is personally liable if he accepts.
2.When an agent acts on behalf of a foreign principal—for example, when the agent enters into a contract for the sale or purchase of commodities on behalf of a merchant based abroad—the agent is personally liable. By putting a phrase in the contract that specifically indicates so, he can restrict his personal liability. He cannot be sued for breach of contract if he does so.
In the case of Delhi Express Travels Pvt. Ltd. v. International Air Transport Association and Others, it was found that when the principal is residing overseas and/or where the principal, despite being disclosed, cannot be sued, a contract making the agent personally liable must be considered to exist.
1.When an agent acts on behalf of an unreported principal—when an agent acts on behalf of an unknown principal—he is personally liable, albeit the principal is also liable if the principal is discovered by a third party.
2.When the agent serves as a principle who cannot be sued, such as when the principal is a minor or an imbecile, the agent is held personally liable since credit is thought to have been given to the agent rather than the principal.