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Report No. 13

154. Section 201. -

There is a conflict of authority on the question as to when the business of the agency of a sale of goods is completed, i.e., whether on payment to the principal of the price realised by the agent or on completion of the sale and receipt of price by the agent. The Allahabad1 and Calcutta2 High Courts take the former view while the Madras High Court3 has taken the latter view. We are of the opinion that the view taken by the Madras High Court represents the law correctly and we consider that agency is determined when the agent ceases to represent the principal, though his liability in respect of acts done by him or by his agents continues.

Under the English Law, the agent becomes functus officio4 on the completion of the contract of sale. That this was the intention of the legislature appears to us to be clear from the heading of the subĀ­chapter in which the section occurs, which is 'revocation of authority'. We do not, accordingly, consider any legislative change to be necessary.

1. Babu Ram v. Ram Dayal, 12 All 541 (545).

2. Fink v. Buldeodas, 26 cal 715 (725).

3. Venkatachalam v. Narayanan, 39 Mad 376 (378-379).

4. Blackburn v. Sholes, 11 RR 723, cited in Bowstead; Op. Cit., 11th Edn., p. 286.

155. This section is not, however, exhaustive of the cases when the authority of an agent is determined and agency is terminated. The following should also be included in the section as circumstances in which the authority of an agent is determined:1

(1) Destruction of the subject-matter of the agency;2

(2) The happening of any event rendering the agency unlawful or upon the happening of which it is agreed between the principal and agent that the authority shall determine;

(3) Insolvency of agent;

(4) Dissolution of the firm, corporation or company where the principal is a firm, corporation or registered company.

There are good reasons for providing for termination of agency on the agent becoming an insolvent. The credit in the market of a person who is adjudicated insolvent is affected and in many cases such an agent is not in a position to fulfill the object of the contract of agency. Under the Insolvency law where a commission agent has sold the goods and realised the money, such money, on his adjudication as insolvent, is not treated as trust money and it goes to the Official Assignee or Receiver.3

1. Bosetead; Op. Cit., 11th Edn., pp. 286-7.

2. Rhodes v. Forwood, (1876) I App Cas 256.

3. Mulla The Law of Insolvency in India, 2nd Edn., p. 465.

156. Sections 202-203.-

No change is necessary in sections 202-203.

Indian Contract Act, 1872 Back

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