In the law of agency, the actions of an agent are generally attributed to the principal. This principle, based on the maxim "Qui facit per alium facit per se" (he who acts through another acts himself), extends to wrongful acts like fraud and misrepresentation.
Under the Indian Contract Act, 1872, the effect of these acts is governed primarily by Section 238.
1. The Legal Rule: Section 238
Section 238 states that misrepresentations made, or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals.
Key Requirements for Liability:
The agent must be acting within the scope of their authority.
The act must be done in the course of the principal's business.
2. Effect on the Contract
When an agent commits fraud or misrepresentation while acting for the principal, the contract becomes voidable at the option of the third party. The third party has two primary remedies:
Rescission: They can choose to cancel the contract and be restored to their original position.
Damages: They can sue the principal for any financial loss resulting from the fraud.
3. Decided Cases
A. Fraud within the Course of Business
Case: Lloyd v. Grace, Smith & Co. (1912)
Facts: A widow owned two cottages and a mortgage. She went to a firm of solicitors to manage her property. The managing clerk of the firm (the agent) induced her to sign documents that actually transferred the property to him. He then sold the property and kept the money.
Decision: The House of Lords held the firm (the principal) liable for the fraud of their clerk. Even though the clerk acted for his own benefit, he was acting within the scope of the authority the firm had given him to handle such transactions.
B. Misrepresentation in the Course of Business
Case: Mullens v. Miller (1882)
Facts: An agent was authorized to sell a property. To induce a buyer, the agent made false representations regarding the rental value and the condition of the property.
Decision: The court held that the principal was bound by these misrepresentations. The buyer was entitled to rescind the contract because the agent was acting in the course of the business of selling that property.
4. Acts Outside the Scope of Authority
It is important to note that the principal is not liable for frauds or misrepresentations committed by the agent in matters which do not fall within the agent's authority.
Example: If a delivery driver (agent) for a furniture store convinces a customer to invest in a fake "gold scheme" while delivering a sofa, the store is not liable. The fraud had nothing to do with the business of delivering or selling furniture.
No comments:
Post a Comment