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Report No. 13

165. Section 215.-

Two conditions-in the alternative-are annexed to the right of the principal to repudiate the transaction where the circumstances mentioned in the section exist. They are (1) dishonest concealment of a material fact; and (2) dealing being disadvantageous to the principal. The English rule does not recognise these conditions. We are of the view that the logical conclusion of the fiduciary character of the relationship of the principal and agent, is that for the exercise of the right of repudiation it should be sufficient for the principal to prove that his consent had not been obtained and that the agent had not acquainted him with all material circumstances.

It should not be further necessary to establish that there was a dishonest concealment on the part of the agent or that the dealings were disadvantageous to the principal. The English rule is founded upon the principle that the agent will not be allowed to put his duty in conflict with his interest and, therefore, he must not enter into any transaction which is likely to produce that result, unless he has first made the fullest disclosure of the exact nature of his interest to his principal and the principal has assented. If there is no disclosure, the fairness of the transaction is immaterial and it is avoidable at the principal's option.1

In the Bank of Upper Canada v. Bradshaw, (1876) LR 1 PC 479 (489) Lord Cairns observed: "Their Lordships are desirous in no way to qualify or to abridge the doctrine of law prevailing in almost all systems of jurisprudence, that any one standing in the position of an agent cannot be allowed to put his duty in conflict with his interests, and they are certainly not prepared to rest the application of the doctrine on the amount of the interest, adverse to that of his employer, which the agent may be supposed to have."

1. Halsbury; Op. Cit., 3rd Edn., Vol. I, pp. 190, 191.

In America the law is stated substantially in the following terms:

'An agent, in dealing with the principal on his own account in regard to a subject-matter as to which he is employed, is subject to a duty to deal fairly with the principal and to communicate to him all material facts in connection with the transaction of which he has notice, unless the principal has manifested that he knows such facts or that he does not care to know of them'.1

1. American Restatement of the Law of Agency, section 390.

The removal of the two conditions mentioned above from section 215 will be in consonance with the provisions of section 88 of the Trusts Act. We recommend accordingly.

166. Sections 216-219.-

Na change is recommended in sections 216-219.

Indian Contract Act, 1872 Back

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