LL.b Notes

Introduction: According to Sec.2(d) of the Indian Contract Act,1872 (hereinafter mentioned as I.C.A.), consideration may be given by Promisee or any other person. In India there's a possibility that consideration for the promise may move not from the Promisee but a third person ,who is not a party to the contact. But in Englad, the position is different , there rule is that consideration must move from the Promisee and nobody else.

Privity of Contract: The doctrine of privity of contact means only those person who are parties to the contract,can enforce the contract. A stranger to a suit can't enforce a contract eventhough the contract may have been entered into for his benefit. E.g., there's a contract between A&B. Under that contract some benefit has been conferred upon X. Here in this case if the contract has breached by B , X can't file a suit against B for the enforcement of contract as because A&B are only parties to the contract wheras X is stranger to the contract.
The rule that a stranger to a contract can't sue but in India, a person who is stranger to a consideratin can sue, because according to Indian law, consideration may be given either by Promisee or by a third party ,so, that doesn't affect the rule of privity of conrtact.

Privity under English Law:- In Tweddel v. Atkinson, it was held that only parties to a contract can sue each other. In the instant case the plaintiff, A merried a girl B. After this marriage there was a contract between A's father and B's father that each would pay a certain sum of money to A and A will have the power to sue for such sums. After the death of the two father, A brought an action against the legal representative of B's father to recover the promised amount. It was held that A couldn't sue for the same as because plaintiff was stranger to consideration so he couldn't enforce the claim.

Privity under Indian Law:- The rule of privity if contract i.e.," stranger to a contract can't bring an action"  is equally applicable in India as as in Englad. However under the I.C.A 1872, the definition of consideration is wider than the English law, yet the common law principal of privity of contract is generally applicable in India,with the effect that only a party to a contract is entitled to enforce the same.

In Jamna Das v. Ram Avatar, A had mortgage some property to X. A than sold the mortgaged property to B, B having agreed with A to pay off the mortgage debt to X. On the default of B , X brought an action against B to recover the mortgage money. It was held by the privy council that since there was no contract between X&B, so X couldn't enforce the contract to recover the amount from B.
Thus it is clear that a third person can't take an action into a contract, however there are some exceptions under this rule where a stranger to a contract can sue. So those exceptions are as follows-
(i) Trust or Charge: A well recognized exception to this rule is that that a trust or Charge created in some property in favour of third person.
In Narayani Devi v. Tagore Commercial Corp. Ltd. A had various share of the value of ₹40500. It was agreed that A would sell his shares in favour of B and in return B would pay to A ₹500 per month and after his death would pay ₹250 per month to A's widow during her life if she survived after her husband. C stood a surety for B. Some payments were made by C to A and after his death to A's widow. Thereafter the payments were stopped. A's widow brought an action against B and C to recover the amount. One of the defence pleaded was that since the plaintiff was not a party to the said agreement which was entered into by her husband and the defendants, she was not legally entitled to sue in respect of the agreement. Rejecting the contention of the defendants, the Calcutta H.C. held that from the facts and the circumstances of the case, an obligation in the nature of trust could be inferred in favour of the plaintiff and an equity having been created in her favour , accordingly she was entitled to sue even when she was not party to the contract. A decree was passed in her favour for the arrears of the amount due.

(ii) Conduct, Acknowledgement or Admission: sometimes there may be no privity of contract between the two parties, but if one of them by his conduct, acknowledgement or admission recognizes the right of the other to sue him, he may be liable on the basis of the Law of Estoppel.
In the same aforesaid case i.e., Narayani Devi, when there was no contract between the plaintiff and the defendants but the defendants in their agreement with the plaintiff's husband had agreed to pay a certain amount to the plaintiff's husband during his lifetime and thereafter to the plaintiff, the question of the right of the plaintiff to sue the defendants had made arisen. It was established that the defendants hd made certain payments to the plaintiff and after her husband's death, in pursuance of the agreement and had thereafter asked for the extension of the time to pay. Apart from that it was found that the defendants, by their admission had earlier called upon the plaintiff to execute certain documents in this connection,which imples that they considered the plaintiff by their conduct to certain rights. It was therefore held that the defendants had created such privity with the plaintiff by their conduct and by acknowledgement and by admission that the plaintiff was entitled to her action even though there was no privity to contract but the plaintiff and the two defendants, when the said contract was entered into.

(iii) Provision for marriage expenses or maintenance under family arrangement:- When under a family arrangement the contract is intended to secure a benefit to a third party he may sue in his own right as beneficiary. Such an action has been allowed in many cases where, on the partition of joint family property between the male member. A provision is made for the maintenance of the female members of the family. The basis of the recognition of such an action is the application of the rule laid down in Veeramma v. Alpayu, under a family arrangement,the father's house was to be conveyed to his daughter and the daughter undertook to maintain him in his lifetime. The daughter being a beneficiary under the compromise arrangement, it was held that she was entitled to sue for the specific performance in her favour.

Conclusion: From the above discussion we get to know that privity of contract means only those persons ,who are parties to the contract can enforce the same (English law) whereas in indian law if the contract is made for the benefit of third party than the third party can bring an action to enforce the same, if the certain exceptions as discussed supra exist.

Introduction:- According to sec.182 of the Indian Contract Act,1872 "an agent is a person employed to do any act for another or to present another in dealings with third person. The person for whom such act is done, or who is so represented, is called the Principal".
    In an agency one person (principal) employs another person (agent) to represent him or to act on his behalf, in dealings with a third person. The act of the agent binds the Principal in the same manner in which he would be bound if he does that act himself.

Rights and duties between principal and agent:
  The act provides for the following mutual rights and duties between principal and agent.
Duties of Agent:

1.Duty not to delegate his duties (sec.190):- When an agent is undertaken to perform certain duties personally, he is not allowed to delegate his duties personally, he is not allowed to delegate his duties to another person. This rule is based on the Maxim "Delegatus non potest delegare" which means that an agent to whom some authority has been delegated can't further delegate that authority to another person. But however this rule has some exception where an agent can delegate his duty to another person i.e., sub-agent. That exceptions are like-
a. When there is a custom of trade to that effect the agent may employ a sub-agent.
b. When the nature of agency so requires, an agent must employ a sub-agent e.g, an agent authorized to recover engage a lawyer for the purpose.
c. When an act does require personal skill, the same may be get done through a sub-agent. For instance to transfer goods from one place to another, the agent may get the work done from a sub-agent.
d. When the Principal, expressly or impliedly, agrees to the appointment of a sub-agent for doing certain work, a sub-agent may be validly appointed.
2. Agent's duty to follow Principal's directions (sec.211):- According to Sec.211, an agent has a duty to follow the directions given to him by te principal. As stated in this section-
a. An agent is bound to conduct the business of his principal According to the direction given by the Principal, or
b. If there are no such directions, the agent should conduct the business according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business.
    When the agent doesn't act as stated above, if any loss is sustained by the Principal, he must make it good to his principal and if any profit accrues, he must account for it.
    Than for e.g., Lily vs Doubleday, an agent was instructed to warehouse his principal's goods at a particular place. He placed a part of them at a different warehouse which was equally safe. But the good were destroyed without negligence.
    The agent was held liable for the loss. Any disability, or departure from, the instructions make the angent absolutely liable for the loss.

3. Duty to show proper skill and care (sec.212)- Sec.212 lays down the standard of care and skill required by an agent,
a. Common law requires an agent to act with due care and skill in performing his duties. Agent who fails to meet this standard are prima facie negligent.
b. Generally speaking, an agent in a certain profession, trade or calling who perform his duty with the degree of care and skill elected of a reasonable, average member of the relevant profession, trade and calling meeds the requisite standard.
   The agent is bound to act with reasonable diligence, and such skill he possesses ; and to make compensation to his principal in respect of the direct consequences of his neglect, one of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want if skill, or misconduct.
   In Keppel v. Wheeler, the Principal instructed and estate agent to find a buyer for his estate. The agent communicated an offer of a prospective purchaser who was willing to buy the estate for £6150 before the contract for sale was concluded, the agent get an offer of £6759 from another buyer. The agent didn't communicate about the second offer to the Principal. It was held that the agent didn't nit show proper skill and care in the matter and, therefore he was liable to pay damages to his principal for the loss suffered by him.

4. Duty to render proper account (Sec.213):- Another duty of the agent is to render proper accounts to his principal and demand. This means that he should maintain proper accounts of the sums belonging to the Principal which are in his hands, he should not misuse and misappropriate them, and on demand from the Principal, he should render true accounts to his principal.

6.Duty to communicate with principal (sec.214):- According to sec.214, it is the duty of angent, in case of difficulty to use all reasonable diligence in communicating with his principal and is seeking to obtain his instructions.

5. Duty not to deal in his own account (sec.215&216):- An agent is under a duty not to deal on his own account in the business of agency, unless the principal consents thereto. If any transaction, an agent deals on his own account without the principal's prior consent ,the Principal has the following two rights:-
a. To repudiate the transaction by showing either:
     i. that any material fact has been dishonesty concealed from his agent, or
     ii. that the dealings of the agent have been disadvantageous to him (sec.215).
b. To claim from the agent any benefit which Amy have resulted to him from the transaction (Sec.216)

7. Duty to pay sums received for principal:- Another duty of the agent is to pay to his principal all sums received by him on principal's account. Before making such payments to his principal, the agent is, however, entitled to make such deductions out of the same as are lawfully due to him  (sec128). According to sec.217, an agent may retain, out of any sums received an 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 payble to him for acting as agent.

Rights of agent and duties of principal:- 
   The Act confers a number of rights an agent and imposes some corresponding duties on the Principal. They are as follows:
1. Right to remuneration (sec.219):- It is basic rights of an agent that he should receive the remuneration of his services. In Saraswati Devi v. Matilal, Matilal, the plaintiff, who was an estate agent, had been engaged by the defendant Smt. Saraswati Devi and her husband, to find a purchaser for certain property. The plaintiff find find a customer, who was willing to pay Rs. 1,27,000 for the property and who also paid an advance of Rs. 30,000. Subsequently, the defendant refused to sell the property to that customer. The plaintiff brought an action against the defendants to recover ₹ 2500 as a remuneration for finding the Customer. It was held that according to nature of this agreement, the remuneration was payble to the plaintiff when he found a purchaser who was ready, willing and able to purchase the property and since he had done that, he was entitled to his commission.

2. Right to retain sums (sec.217&218) :- in conducting the business if an agent advances or spends some money for the betterment of a business. He has also right to retain that amount from the total sum received by him an account of the Principal.

3.Right to lien on principal's property (sec.221):-An agent has right to retain the goods or property of a principal till the payment in due is received by him.

4.Right to compensation for damages due to principal's neglect (sec.225):-  In case of injury caused to agent by the negligence or want of skill of the Principal may be compensated by the Principal.
    For example, A employes B as a bricklayer in building a house and puts up the scaffolding himself. The scaffolding is unskillfully put up and B is in consequence hurt. A must make compensation to B.

5.Right to be indemnified (sec.222-224):- An agent had a right to be indemnified against the liabilities falls on him.
    a. Indemnity for lawful acts sec.222:- According to this Section the employer of an agent is bound to indemnify him against the consequence of all lawful acts done by such agent in exercise of the authority conferred upon him.
    c. Indemnity for civil wrong (sec.223):- The agent is entitled to indemnity against the consequence of an act done in good faith, even though the act causes an injury to the rights of third persons e.g., it is a tort.
    d. No indemnity in case of criminal offences (sec224):- When the agent commits a crime at instance of the Principal, the agent can't claim indemnity from the Principal against the consequence of the crime, even though the Principal has expressly or impliedly promised to indemnify him.

Conclusion:- At conclusion we can say that an agency is a creation of a contract entered into by mutual consent between a Principal and an agent. By agency Principal grant authority to an agent to act or his behalf of and under the control of the Principal. The relationship between a Principal and agent is fiduciary and an agent action bind the Principal. An is liable to a Principal when she/he acts without actual authority, but the apparent authority. Similarly the Principal is also liable for the loss caused to the agent due to his negligence.