CONTRACT OF

AGENCY
AGENT AND PRINCIPAL
(Sec. 182)

In Krishna v Ganapathi, AIR 1955

Mad 648

Every

person who acts for another is

not an agent.

i.

A domestic servant renders to his

master a personal service;

ii. a person may till anothers filed or

iii.a person may work in a workshop or
factory or mine or may be employed
upon his roads or ways.
In none of these capacities he is an agent
and he is not acting for another in
dealings with a third person.

It

is only when he acts as a

representative of the other in business
negotiations, that is to say, in the
creation, modification of termination of
contractual obligation, between that
other and third persons, that he is an
agent.

 Thus

representative character and

derivative authority may briefly be
said to be the distinguishing feature of
an agent.

ESSENTIALS OF AGENCY
1.Principal is liable for the acts of
agent
The principal is liable for all the acts of an
agent which are lawful and within the
scope of agents authority.

The contracts entered into by the agent

on behalf of the principal have the same
legal consequences as if these
contracts were made by the principal
himself.
2. Who may employ an agent?
[SEC183 ]
Any person may employ an agent if
He is of the age of majority; and
He is of sound mind.

3. Who can be an agent? [SEC 184]

 Any person may become an agent.

Even a minor or a person of unsound
mind can become an agent

But a agent is not responsible to an

principal if he is a minor or is of
unsound mind.
4.. Requirement of consideration
[SEC 185]

No consideration is necessary for

creating an agency.

KINDS OF AGENTS

I. BASED ON AUTHORITY

I. BASED ON NATURE OF WORK

Del Credere Agent Another type of

mercantile agent. Where an
agent
undertakes, on the payment of some
extra commission, to be liable to
the principal
for the failure of the
third party to perform the
contract.
However a Del Credere Agent is not
responsible to the buyer for any default on
the part of the principal nor he is liable for
any disputes between the principal and
the buyer relating to the contract or the
sum due

DELEGATION OF AUTHORITY

SUB AGENT

A person who is employed by, and acting

under the control of, the original agent in
the business of agency [Sec 190]
No delegation An Agent cannot lawfully
employ another to perform acts which he
has expressly or impliedly undertaken to
perform personally, unless by the ordinary
custom of trade a sub- agent may or, from
the nature of the agency, a sub agent
must, be employed [Sec 191]
Proper
Delegation
-Principles
representation When a sub agent is
properly appointed, the principal is, so far
as regards third persons, represented by
the sub- agent ,and is bound by and
responsible for his acts, as if he were an
agent originally appointed by the principal
[Sec 192]

Agentss
responsibility
for
subagent- the agent is responsible to the
principal for the acts of the sub agent
Sub- agents responsibility The sub
agent is responsible for his acts to the
agent, but not to the principal, except in
cases of fraud or willful wrong
Improper
Delegation
Agents
responsibility for sub agent appointed
without authority
Where an agent, without having authority
to do so, has appointed a person to act as
a sub- agent, the agent stands towards
such person in the relation of a principal to
an agent, and is responsible for his acts
both to the principal and to third persons;
The principal is not represented by or is
responsible for the acts of the person so
employed , nor is that person responsible
to the principal [Sec 193]

SUBSTITUTED AGENT [SEC 194- 195]

Where an agent ,holding a express or
implied authority to name another person
to act for the principal in the business of
the agency, has named another person
accordingly, such person is not a subagent, but an agent of the principal for
such par of the business of the agency as
is entrusted to him
Eg A authorizes B, a merchant to recover
the moneys due to A from C . B instructs
D, a solicitor, to take legal proceedings
against C, for the recovery of the money.
D is not a sub- agent, but is solicitor for A.

CREATION OF AGENCY

I. Express agreement

A person may employ another person

as his agent by entering into an express
agreement with him.

The agreement may be either oral or

written.
Where an appointment is made by a
deed, it is called a power of attorney
II. Implied Agreement
Implied Agencies arises from the
i. conduct
ii. Situation
iii. Relationship of parties

A. Agency by estoppel

If

a person makes a representation (by

his words or conduct) to a third person
that a certain person is his agent; and

the third party believing such

representation to be true, enters into a
contract with the pretended agent.
Then

the person making the representation

is prevented from denying the
truth of agency. He may be held
liable as a principal by such third party.
Agency of holding out

Such an agency comes into existence

when a person by his affirmative or
positive conduct leads third persons
to believe that person doing some act
on his behalf is doing with authority

In Cullen v. BMW, 490 F. Supp. 249

(E.D.N.Y. 1980).
1. Cullen paid an auto dealer for a car
which was never delivered.
2. The manufacturer, BMW, had
terminated its relationship with the dealer
due to customer complaints and financial
irregularities, but he continued to sell from
his inventory of BMW cars and to use the
BMW logo.
3.The question before the court was
whether can Cullen sue BMW on grounds
of (a) agency by estoppel or (b)
negligence in violation of a duty to
customers?

4. BMW did not give actual authority to

the dealer, and thus he was acting as a
pretended agent. Hence, the car dealer
(agent) can be held liable and is estopped
( is prevented from denying the truth
of agency) from denying its linkage with
BMW.

B. Husband and Wife relation

An implied agency exists between
husband and wife.
A wife living with her husband has the
implied authority of the husband to buy
articles of household necessity. A wifes
implied authority to bind her husband by
her credit purchases , is however subject
to some important limitations.
Firstly, it is necessary that the husband
and wife should be living together.

Secondly, they must be living together in

a domestic establishment of their own.
These two principles were established in
the case of Debenham v Mellon([1880] AC
24)

But a husband has no original, inherent or

implied power to act as an agent for his
wife unless an appointment made by an
express agreement or by ratification.
In Jawaharlal Dalmia & Co. v Chinta
Chittermma [(1989) Adh LT 335],
A husband has no implied authority to sell
his wifes property.
III. Agencies by necessity
(i) There was an actual and definite
necessity for acting on behalf of the
principal.

(ii) The agent was not in a position to

communicate with the principal.
(iii) The act was done for the purpose of
protecting the interest of his principal.
(iv) The agent has exercised such
reasonable care as a man of ordinary
prudence would have exercised in his own
case.
(v) The act was done bonafide.

Eg: When a injured person is in urgent

need of medical attendance. Any person
acting on his behalf may call the services
of a doctor; or any doctor may volunteer
his services. The person benefited is
bound to pay the charges of the service.
In Matheson v Smiley (1944) 22 Can BR
492,

A surgeon was entitled to recover from

the deceased mans estate reasonable
remuneration for his services when he
had, without request, given aid to a man
who had attempted suicide.
IV. By Subsequent Ratification
If

a person (viz., pretended agent) acts

on behalf of another person (viz, the
principal)

the pretended agent acts without the

knowledge or consent of the principal;
and

Afterwards, the principal accepts such

act.
Then

Agency by ratification comes into

existence.

In Williams v North China Insurance Co,

(1896) 1 CPD 757,
A person insures the goods of another
without his authority, the owner may
ratify the policy and then the policy will
be as valid as if the agent had been
authorised to insure the goods.
Ratification may be expressed or
implied [Sec 197]
A without Bs authority lends Bs money
to C. Afterwards B accepts interest on the
money from C.Bs conduct implies
ratification of the loan

Effects of ratification

The principal is bound by the acts

ratified by him as if such acts had been
performed by his authority. Thus
establishes the relationship of agent
and principal insofar as the act ratifies
is concerned between the person
ratifying and the person doing it

Ratification relates back to the actual

date of the act that is ratified and not
from the date when the act ratified.
[Sec 196- Doctrine of Relation Back]
In Bolton v Lambert [(1889) 41 Ch D
295],
1.The defendant made an offer to the
managing director of a company, who
having no authority to do so, accepted it.

2. The company was to opt to ratify it or

not. But the company had ratified only
after the defendant had withdrawn his
offer.
3. The company sued for specific
performance.

Conditions for a valid

ratification
I. Knowledge of Facts [Sec 198]

No valid ratification can be made by a

person whose knowledge of the facts of
the case is materially defective. In other
words, the principal must have full
knowledge of all the material facts.
II. Whole Transaction [Sec 199]
It must be done for whole transaction in
fact; ratification of the part of a
transaction operates as a ratification of
the whole transaction.

III. Act on behalf of another person

 The acts done by a person (i.e.

pretended agent) on behalf of another
person (i.e. principal), who wants to
ratify it, can only be ratified.
If the agent acts in his own name and
makes no allusion to agency his act
cannot be ratified even if the agent in his
secret mind intended to act for another.
In the famous decision, Keighley Maxsted
& Co v Durant([1901] AC 240)
1. KM& Co authorised their agent to buy
Karachi wheat at specified rates on their
account. Wheat was not obtainable at
those rates.
2. He bought wheat from Durant at a
higher rate. He did so in the hope and
confidence that his act would be adopted
by the Principal and contracted in his
own name

3. The principal approved the purchase,

but. when the price of wheat fell, refused
to take delivery
4. Durant sued the agent and principal for
breach of contract. But the principal were
not held liable.
IV. By the principal

Ratification can be made by only such

person for whom the act was done.
V. Existence of principal

The principal must be in existence at

the time when the act was done in his
name

VI. Contractual capacity

The principal must have contractual

capacity both at the time of entering
into the contract and at the time of
ratification.

VII. Acts within principals power

Ratification can be made only for such

acts which principal had the power to
do.
IX. Communication

 Ratification must be communicated to

the third party so as to bind him
X. Lawful Acts [Sec 200]

Only those acts which are lawful can

be ratified. Void, illegal, or ultra vires
acts cannot be ratified.
A holds a lease from B, terminable on 3
months notice
C , (pretended agent) an unauthorised
person gives notice of termination to A
The notice cannot be ratified by B, so as
to be binding on A.

XII. Within reasonable time

Ratification must be made within

reasonable time of the act purported to
be ratified.
In Metropolitan Asylum Board v Kingham
& Son , [(1890) 6 TLR 217],
1. the tender for supply of eggs was
approved by a board, but not formally.
2. the time for commencement of the
performance was September.
3. But the Board ratified it on October 6.
4. It was held to be too late as it was done
after the date fixed for performance.

DUTIES OF AN AGENT
I. Duty to Execute Mandate
The agent should perform the work which
he has been appointed to do. Any failure
in this respect would make the agent
liable for the principals loss.
In Pannalal Jankidas v Mohanlal, [AIR
1951 SC 144]
1. A commission agent purchased goods
for his principal and stocked them in a
godown pending their dispatch.
2. The agent was under instruction to
insure them. But failed to insure the
goods.

3. The good were lost in an explosion.

4.The agent was held liable to
compensate the principal for his loss.

II. Duty to Follow Instructions or

customs [Sec211]
1. To conduct the business in accordance
with the directions given by the principal.
2. In the absence of directions, the agent
has to follow the custom which prevails
in business of the same kind and at the
place where the agent conducts the
business.

3. When the agent acts otherwise, if any

loss be sustained, he must make it good
to his principal., and if any profit accrues,
he must account for it.
In Llilley v Doubleday, [(1881) 7 QBD
510],
An agent was instructed to store the
goods in one particular warehouse . But
he stored a part of them in a different
place which was equally safe. But the
goods were destroyed without
negligence.

III. Duty to Reasonable care and skill

[Sec212]

Every agent is bound to carry on the

business of agency with reasonable skill
and care. The standard of care and skill
which an agent has to follow depends
upon the nature of his profession.
In Heys v Tindall, [(1861) 1 B & S 296], it
was held that
1. An agent, having authority to sell on
credit, must take care to ascertain the
solvency of his buyer.
2. An insurance broker must see that
usual clauses for the protection of the
principal are inserted in the policy.
3. An estate agent should know the land
laws and also must take care to ascertain
the solvency of the tenant

IV. Duty to avoid conflict of interest

[Sec215]
1.An agent occupies fiduciary position
and therefore, it is his duty not to do
anything which would bring his personal
interest and his duty to the principal in
conflict with each other.
2. The conflict invariably arises when the
agent is personally interested in the
principals transaction .
3. The agent involves his own account in
the business without principals consent
and
thereby
puts
him
in
a
disadvantageous position.
Eg: An agent buys himself the property in
which he was appointed to sell or delivers
his own goods when he is instructed to
buy on his behalf of he principal

The principal has the following rights:

(a) He may repudiate the transaction,
if the agent dishonestly conceals any
material facts or the dealings of the agent
prove to be disadvantageous to him.
(b) He may claim from the agent the
agency business other than the agreed
remuneration

V. Duty not to make secret profit

[Sec216]

Not to make any secret profit out of

the agency business other than the
agreed remuneration
Eg: A directs his agent to buy a certain
house for him . B tells A it cannot be
brought, and buys the house for himself.
A may, on discovering that B has bought
the house, compel him to sell it to A at
the price he gave for it
In Harrington v Victoria Graving Dock Co.
(1878) 3 QBD 549,
Acceptance of bribe is a profit of this kind

VI. Duty to remit sums [Sec218]

To remit to the principal all the sums

received in the principals accounts in
accordance with the terms and
conditions of contract of agency.
VII. Duty to maintain accounts
[Sec213]
For the proper performance of agents
other duties, it is necessary to maintain
proper accounts
In Narandas v Papammal, [AIR 1967
SC 333],
Even the agent has got the right to sue
the Principal under special circumstances
like where all the accounts are in the
possession of the principal

VIII. Duty not to delegate [S 190]

Delegatus non protest delegare ,is a
well known maxim of law of agency the
principal chooses a particular agent
because he has trust and confidence in
his integrity and competence.
Therefore, ordinarily, the agent cannot
further delegate the work which has been
delegated to his by principal. But there
are exceptions:
1. Nature of Work : Sometimes the
very nature of work mandates it
necessary for the agent to appoint a sub
agent.
Eg: an agent appointed to sell an estate
may retain the services of an auctioneer

2. Trade Custom: A sub- agent may be

appointed and the work delegated to him
if there ordinary custom of trade to that
effect.
Eg: Architects generally appoint
surveyors. [Moon v Witne Union,
(1837) 43 RR 802]
3. Ministerial Action: An agent cannot
delegate acts which has expressly or
impliedly undertaken to perform
personally,
Eg: Acts requiring personal or
professional skill. But the agent may
delegate acts which are purely ministerial
in nature , eg, authority to sign.[Mason v
Joseph,(1804) 1 SmithKB 406]

4. Principals consent: The principal

may expressly allow his agent to appoint
a sub-agent. His consent also be implied
from the conduct of the parties.
The principal may also ratify his agents
unauthorised delegation .

RIGHTS OF AN AGENT
1. Right to remuneration [Sec 219]

To receive the agreed remuneration. If

the remuneration is not fixed, then he
has the right to recover such
remuneration as is usual and
customary in such business.
In Green v Barlett [(1863) 14 CS (NS)
681],

1. An agent was appointed to sell a

house. He held an auction but failed to
find a purchaser.
2. One of the persons attending the
auction obtained address of the Principal
an purchased the house without
intervention of the agent.
3. Even so the transaction was held to be
a result of the agents effort entitling him
to his commission

Effect of Misconduct [Sec 220]

An agent who is guilty of misconduct in
the business of agency, is not entitled to
any remuneration in respect of that part
of the business which he has
misconducted.
II. Right to retainer [Sec 217]

 To retain money out of the sums

received in agency business for
advances made or expenses incurred
and remuneration due to him.

He can retain only such money as in

possession and not entitled to equitable
lien[Bombay saw Mills Co, Re ,ILR
(1888) 13 Bom 314]
III. Right to Lien [Sec 221]

Right of lien on principals goods,

papers and other property until the
amount due to him in respect of the
same is paid.

In Gopaldas v Thakurdas, AIR 1957 MB

20

1. The agents lien does not give

unrestricted authority to the agent to deal
with the property in any manner the
agent wishes to.
2. The right is limited in nature and it
enables the agent to retain the property
till his dues are paid.
3. But this confers no authority on the
agent to sell or otherwise dispose off the
property without the consent of the
owner.
Loss of Lien:
The agents lien is lost in following
circumstances:
1. When possession is lost as lien is a
possessory right
i. Possession is lost when the agent
delivers the goods to the principal himself
or to some carrier for the purpose of
transmission to the principal, latter case
cannot revive the lien by stopping the
goods in transit.

ii. The lien is lost when the agent waives

his right. The waiver may be out of an
agreement, express or implied, or may be
inferred from conduct inconsistent with
the right.
iii. if a contract to the contrary exists
between agent and principal.
IV. Right to indemnity [Sec 222 and
223]

An agent has the right to be

indemnified by the principal against the
consequences of all lawful acts done in
exercise of the authority conferred on
him and against all consequences of
acts done in good faith
In Hichens v Jackson [1943] Ac 266 HL

A stockbroker on the instructions of a

solicitor, contracted to sell certain shares
and had to incur liability to the purchaser
by reason of the owners refusal to
complete the sale, the stockbroker was
held entitled to recover indemnity from
the principal.

V. Right to compensation [Sec 225]

An agent has the right to be

indemnified by the principal against
consequences of acts done in good
faith that caused an injury to third
person.

A employs B as a bricklayer in building a

house, and puts up the support himself.
The support is unskillfully put up, and B
as a consequence gets hurt. A must make
the compensation to B.

PERSONAL LIABILITY OF AGENT [Sec

230]
General Rule No personal liability
[ Sec.230]
In the absence of contract to contrary, an
Agent cannot be
(a) personally enforce contracts
entered into by him, on behalf of his
Principal,
(b) be held personally liable for them.
This is because the Agent merely acts on
behalf of his Principal. Thus, he enjoys
immunity from being personally sued.

Exceptions, i.e. Agent personally as

well as Joint & Severally Liable
The Agent is personally liable in the
following cases

1. Foreign Principal [Sec.230] : Where

the contract is made by an Agent for the
sale or purchase of goods for a merchant
resident abroad.
Tutika Basavraju v Pary & Co, [(1903)
27 Mad315]
A company registered in England and
having a place of business in India, has
been held to be a foreign principal for the
purpose of this presumption and the
Indian agent acting for it was held
personally liable.

2. Undisclosed Principal [Sec.230]:

Where the Agent does not disclose the
name of his Principal.
Bhojabhai v Hayen Samuel ,[(1898) 22
Bom 754]
The Honorary Secretary of a school was
held personally liable for the rent of a
house hired by him in his own name
though for purposes of the school.

3. Non- existent or Incompetent

Principal [Sec.230]:

Where the Principal, though disclosed,

cannot be sued, e.g. Principal becoming
of unsound mind, subsequent to
appointment of agent.
Shet Manibhai v Bai Rupaliba, [(1899)
24 Bom 166]
An agent who contracts for a minor, the
minor being not liable, the agent
becomes personally liable.
4. Action against Agent or Principal
[Sec 233] :
Where the Agent is personally liable, a
person dealing with him may hold - (a)
either him or (b) his Principal or (c) both
of them liable. The liability of Principal
and Agent is joint and several.

3. Pretended Agent [Sec.235]:

i. Liability of Pretended Agent : Where a
person pretends to act as the agent of
another he may be saved by ratifying the
act. But if no ratification is forthcoming
the pretended agent becomes liable to
the third party for any loss.
ii. Person falsely contracting as agent, not
entitled to performance:
When a person has, in fact , no principal,
yet persuades the other to contract with
him as agent of another, he is estopped
from saying that he had no principal. He
has to bare the liability.

4. Exclusive liability [Sec. 234] :

Where a person has made a contract

with an Agent and

Induces such Agent to act upon it in

the belief that only his principal would
be held liable,

 Induces the principal to act upon it in

the belief that only his Agent would be
held liable.

Such Third person cannot later on,

shift the liability on to
The Agent, or
The principal, respectively.
5. Agent exceeds authority & act not
ratified:
Where an Agent acts either without any
authority or exceeds his authority, he
shall be held personally liable when the
principal does not ratify his acts.
In Collen v Wright, [(1857 8 E& B 647)],
1. W was land agent for one G. W agreed
to grant to the plaintiff a lease of Gs
farm for 121/2 years .

2. He honestly believed that he had the

authority to do so. But W refused to
execute the lease deed.

3. G proved that he had given no such

authority to the agent.
4. W (agent) ,having died in the
meantime, the plaintiff sued his executors
for the loss he had suffered in entering
upon the farm, and they were held liable.

SCOPE OF AUTHORITY
I. To determine the extend of Agents
Authority [Sec 188]

An agent who is authorised to do an act

or to conduct a business
, by the Principal,
has authority to do every lawful thing
for fulfilling that act or has authority to do
every lawful thing necessary for the
conduct of the business respectively.
i. Every agent has the implied authority to
act according to the custom and usage of
a particular market or trade.
ii. The principal is bound by such usage
even if he is unaware of them or even if it
conflicts with his instructions.
iii. But not bound if the custom or usage
is unlawful or unreasonable and also any
custom or usage is unreasonable if it
changes the very nature of agency.

In Dingle v Hare, (1859) 7 CB (NS) 145

1. An agent was authorised to sell
artificial manure. He had no authority to
give a warranty about the goods. Yet he
warranted to the buyer that the manure
contained 30% phosphate of lime.
2. The warranty turned out to be false
and the principal was sued for breach.
3. The principal is held liable because it
was usual in the artificial manure trade to
give a warranty of this kind.

II. APPARENT /OSTENSIBLE AUTHORITY OF

AGENT [Sec 237]

An agent without authority done an act

or incurred obligation to third person on
behalf of his principal

The principal is bound by such acts or

obligation if he has by his words or
conduct induced such third person to
believe that such acts and obligations
were within the scope of the agents
authority

III. AGENTS AUTHORITY IN EMERGENCY

[Sec 189]

In state of emergency, an agent has

authority to do all such acts for the
purpose of protecting his principal from
loss as would be done by a person of
ordinary prudence, in his own case
under similar circumstances
Eg: 1. An agent for sale may have goods
repaired if it be a necessary.
2. A consigns provision to B at
Calcutta, with direction to send them
immediately to C, at Cuttack. B may sell
the provisions at Calcutta, if they will not
bear journey to Cuttack without spoiling

IV. AGENTS ACTS IN EXCESS OF

AUTHORITY[SEC 227- 228]
1. An agent exceeds his authority, actual
or apparent, the principal is not bound by
the excess work.
2. but it is separable from the authorised
work the principal will be bound to that
extend
In Ahammed v Mohd. Kunhi, [AIR 1987
Ker 228],

The agent was authorised to sell half a

right over a property and he contracted to
sell all the rights, the principal became
bound only to the extend of half the rights
authorised by him, they became
separable from the rest

3. If the authorised work is not separable

from the rest, the prinicipal may
repudiate the whole of the transaction

A authorises B to buy 500 sheep for him.

B buys 500 sheep and 200 lambs for one
sum of 6000 Rs. A may repudiate the
whole transaction.
IV. EFFECT OF NOTICE TO AGENT [Sec
229]
A notice served to or information obtained
by an agent in the course of the business
transacted by him on behalf of his
principal, shall, as between the principal
and third parties, have the same legal
consequence as if it had been given to or
obtained by the principal.
In
Jani
Nautamlal
Venishanker
v
Vivekanand Coop Housing Society, AIR
1986 Guj 162
1. The secretary of the society was de
facto and de jure incharge of the affairs of
the society

2. A notice was given to him of the fact

that a partner of a firm with which the
society had dealings had retired, which
operated as a notice to the society.
V. LIABILITY FOR AGENTS WRONGFUL
ACTS
Agents Misrepresentation and Fraud
[Sec 238]

1. To fix the principal with vicarious

liability for the wrongs of his agent ,it is
necessary that the wrong must have been
committed in the course of the
principals business.
2. As with respect to Sec 238,
misrepresentation or fraud committed in
the course of business, have the same
effect on the agreement made by the
agent as if it was done by the principal
himself and will be bound.
3. But if it outside the scope of authority,
will not affect the principal

Agents Torts
1. If one chooses to do business through
an agent an agent may in certain
situations be liable for a tort committed
by the agent
2. the doctrine of respondeat superior
(let the superior answer/let the principal
be laible) will applied to make the
principal liable where the agent commits
a tort engaged in the business of the
principal.
In Lloyd v Grace Smith and Co, [1912] AC
716,
1 Grace Smith and Co were a firm of
solicitors of some repute and
respectability.

2. Mrs. Lloyd , a widow being dissatisfied

with the income of her two cottages,
consulted the firms clerk, was incharge of
the conveyancing business, as to how to
improve the income.
3. The clerk advised her to dispose off her
property and asked her to bring the title
deeds which she did and obtained her
signature in two papers

4. The clerk converted these papers into a

sale deed to himself and subsequently
disposed of the property and
misappropriated the proceeds.

5. It was held that the firm is vicariously

liable for the fraud committed by their
representative in the course of his
employment.

RIGHTS AND LIABILITIES OF

UNDISCLOSED PRINCIPAL [Sec 231- 232]
1. The doctrine of undisclosed principal
comes into play when the agent neither
discloses the existence of his principal nor
his representative character.

2. As a general rule, when an agent has

contracted in his own name, he is bound
by the contract. He may be sued on it and
he has the right to sue the third party and
the principal is not liable in such cases.
But the principal too has the right to
intervene and assert his position as
an undisclosed party to the contract.
This right is referred to as an
anomalous right because it does
not fit in any of the established
principle of the law of contract.

In Gurratt v Cullum[(1710) Bull P 42],

An agent sells his principals property in

his own name and receives the price, the
principal is obviously entitled to trace his
money and recover it, even if the agent
has gone bankrupt.
Under the foll: conditions Principal can
intervene:
1. Firstly. the third party would have
against the principal the same rights
which would have had against the agent
if the agent had been a principal
A (agent) , who owes 500/- to B (third
party),sells1000/- rupees worth of rice to
B.
A is acting as an agent for C (Principal) in
the transaction.
But B has no knowledge nor reasonable
suspicion that such is the case.
C cannot compel B to take the rice
without allowing him to set off As debt.

2. Secondly, if the principal discloses

himself before the contract is completed,
the third party may repudiate the
contract if he can show that if he had
known who the principal was or that the
agent was not the principal, he would not
have contracted
In Said v Butt ([1920] 3KB 497),
1. A theatre ticket was purchased by a
person through an agent knowing fully
that a ticket would not have been issued
on personal grounds.
2. It was held that the theatre- owner had
the right to repudiate the contract and
exclude him from admission.

3. Lastly, an undisclosed principal cannot

intervene if some expressed/ implied term
of the contract excludes him from the
contract