LAW OF CONTRACT

HOME ASSIGNMENT

PERSONAL LIABILITY OF AN AGENT

AND
REMEDIES AVAILABLE TO AGGRIEVED PARTY
CONTENTS

1. Acknowledgement

2. Summary

3. Introduction –
Content
Historical aspect
Development of subject
Analysis

4. Conclusion

5. References
ACKNOWLEDGEMENT

Primarly I would like to thank God for being able to complete this project with
success. Then I would like to thank my contract law teacher Geetanjali maam,
whose valuable guidance has been the ones that helped me patch this project and
make it proof success. Her suggestions and her instructions has served as the major
contributor towards the completion of the project.

Then I would like to thank my parents and friends who have helped me with their
valuable suggestions and guidance has been helped in various phases of the
completion of the project.

Last but not the least I would like to thank my classmates who have helped me a lot.

Thank you
SUMMARY

In the topic of personal liability of an agent , we can see the relationships between
an agent and his principal . We can also see the relationships between third parties
and the principal or agent . Many objectives and questions can be learnt and
answered in this report like :-
1. Whether the principal becomes liable when the agent makes a contract for his
principal in the course of his work .
2. Whether the agent is responsible or not for the contracts entered into on behalf of
his principal .
3. Whether the relationship be terminated between the principal or the agent that
may no longer have responsibility toward or liability for the acts of the other .
We can learn , most importantly , under what all circumstances an agent becomes
personally liable or not in the contracts between the principal and the parties .

In the topic of Remedies available to aggrieved party , we can see the different
kinds of remedies provided to the aggrieved party due to breach of contract . The
remedies can be : -
1. Recession of contract
2. Sue for damages
3. Sue for specific performance
4. Injunction
5. Quantum Merit
Also, we can see under what all sections will the remedies be applicable to the
aggrieved party .
INTRODUCTION

Contents – This project contains information, that is , history, development and

analysis on two topics : Personal liability of an agent and Remedies of breach of
contract

PERSONAL LIABILITY OF AN AGENT

History , development and analysis

The up-to-date concept of agency in the common law legal system is the outcome of
many influences in its history
In the English law of contracts, the doctrine of principals and agent was based upon
three elemental propositions. These were:

1. The creation by contract, express or implied of the relation,

2. The non-liability of the agent for contracts made in the name of his principal, and
3. The liability of the principal for contracts made by his duly authorized agent.

The concept of agency representation in the sense it is understood now

emerged around the twelfth century (A.D) along with the salve and slave
owner’s relations. Since the early time, salves were considered as a mere
chattel without any rights. It was logical to hold the owner legally liable for
the acts of his slave, especially if the acts of the slave were done based on
the direction of the slave owner. Hence this slave and slave owner
relationship paved a way for the creation and the concept of
representation. And during this time, the responsibility of a principal for the
acts of his agent or servant was commenced.

The concept of agency developed independently in the civil and common law legal
systems. However, the rudimentary rules of agency representation as it is
understood today became visible in both legal systems around the end of the twelve-
century and early thirteen centuries. It is believed that agency was not part of the
common law until the 13th century. However, owing to the master and servant
relationships which emerged around the end of the12th century and beginning of
13th century.

Although, the concept of agency representation appeared around the end of the 12th
century, its rules came to be arranged and significant, in order to facilitate
commercial centers in the 19th century. Where business activities widely spread in
most parts of the world especially in Europe commercial transaction was highly
developed in volumes. Owing to this reason the rules of agency started to be
organized and collected from the various fields over which they were distributed.
Owing to the influence of mercantile law by which commercial activities were
developed in volume, the common law developed the principle that a principal was in
direct contractual relation with third parties in which such principle laid down the
foundation for the theory of agency. The development of such principle makes the
principal liable to third persons. This liability was with regards to the goods bought or
acquired by the agent, on the basis of which the principal had thereby obtained the
use and benefit of the goods.
The genesis of such principle, which makes the principal in direct contractual
relationship with third parties in a contract made by his agent, emerged from the
case of Costace V. Forteye, which was decided in 1389 by the major and elder men
of the city of London. Under this particular case, an apprentice and attorney of a
London merchant bought wine from a French merchant for his master (Fortenye);
and when he failed to satisfy the full payment to the seller, the agent was committed
to prison. However, the agent (apprentice) i.e. Costance, alleged that it was his
master who sent him to buy the wine and then the master approved the bargain. The
Mayor then ordered the master (defendant) to satisfy the full payment to the French
seller and set the plaintiff free from prison. The decision of the Mayor was based on
the ground that the apprentice bought for the use and benefit of the master.
The point that we can understand from the above case is that, a direct claim by a
third party was admitted against the principal for contracts made by his agent for the
benefit of the principal.
The trend of being represented through an agent spread somehow readily in the
course of the 12th and 13th centuries owing to the allied influence of mercantile
necessity and cannon law. In addition to this the development of trading companies,
which must necessarily act through agents, helped its further development.
In the medieval period, the idea that it is possible to make a contract through an
agent, and that it is possible for a man to ratify for a contract made on his behalf
through an agent was recognized by the common law. The common law also,
accordingly, recognized that on such contracts by an agent on behalf of his principal,
it was to be held that the principal and not the agent was liable, not only when the
agent had express authority to do the particular acts, but also when he acted within
the scope of an authority to do acts of a particular kind.

Therefore the law came to be framed as the below:

As agent is only a connecting link between his principal and the third party, he
cannot, as a rule, personally enforce the contract entered into by him on behalf of his
principal, nor can he be personally liable for such contracts in the absence of a
contract to the contrary. But there are circumstances under which the agent incurs
personal liability.
HISTORY AND DEVELOPMENT OF CONTRACT LAW

The historical development of contract law can be under stood in terms of the
conceptual foundations of obligations, which was traced back to ancient and
classical Roman law. However the foundations of the present day law of contract
were laid in the 19th century. This period in history saw the rapid expansion of trade
and industry inevitable resulting in the increments in the volume of commercial
disputes as a result people turned to the court of law for solutions. Gradually, there
developed a body of settled rules which reflected and of the disputes from which
they arose and the prevailing belief of the time. However, this rules and belief are
affected by the dominant economic philosophy, the so called the laissez-faire
individualism-the view that the state should not meddle in the affairs of business and
that individuals should be free to determine their own destinies. This philosophy was
mirrored in the law of contract by two assumptions-freedom of contract and equality
of bargaining power. According to freedom of contract theory it is assumed that
everyone is free to choose which contracts they entered into and the terms on which
they wish to do so. According to equality of bargaining power theory, the parties
were deemed to have equal power to bargain on their business and deemed to be of
equal bargaining strength.
These theoretical foundations of contract law produced an acceptable legal
framework for the regulation of business transaction that resulted in the
crystallization or codifications of contract laws across the world. The two theories did
also define the role of the courts. Courts were required to enforce the agreement of
the parties, as it was without questions its fairness etc. Over years the freedom of
contract theory though maintained at present is subjected to different limitations. The
theory of equality of bargaining power had brought certain unnecessary results
because parties to a contract do not necessarily have equality. For example,
employers and employees, producers and consumers, lenders and borrowers do not
have equal power in the negotiations. Employees, for example, did not have equal
bargaining power with employers, and as a result entered in to contracts the terms of
which were more favorable to the employers (employees were supposed to work for
as long as 16 hours per day & more, less wages etc). Courts were simply required to
enforce such terms. This led to dissatisfaction, riots, unrest etc calling for
government intervention. Thus, governments do lay down the minimum conditions
for enforceable employment contracts. Today, we find the law of contract providing
the conditions for the making and enforcement of contract. However, we should note
that the theory of freedom of contract and equality of bargaining power are still the
foundations of contract law in many legal systems.
To break a contract and injure the other party was considered as immoral. So the
action for recovery of damages for breach of contract was considered as a suitable
remedy in such cases. Commerce was growing in the 18th -19th centuries, and all
dealings related to commerce were dependant on credit and this credit was matured
on promise. Thus, if the promise was broken, the edifice of commerce stood in
danger. So, Sir George Paton has rightly stated “Credit depends essentially on ability
to rely on the promise of others and thus can flourish only where there is a fully
developed law of contract.” The cause of justice was considered another ground on
which the moral basis of contract was developed. If parties come to an agreement
freely and independently, it means they are enabled to keep the agreements also.
The law of contract is a sanction for the legal enforcement of such promises; it
guarantees the fulfillment of reasonable expectations. Further Professor Plucknett
Pithily made it more clear in his own words: “The church very early took a strong
view of the sanctity of contractual relationships, insisting that in conscience the
obligation of a contract was completely independent of writings, forms and
ceremonies and tried so far as he could translate this moral theory into terms of law.”

Hence, even the Court of Chancery offered remedies where good faith and honest
dealing demanded promises being enforced. Gradually, this influenced the common
law courts also to give suitable remedy for a breach of contract. The doctrine of
consideration had not yet then fully developed but the judges felt a duty to enforce
moral obligations. The theory of moral basis was further developed by the judges for
many years in a number of cases. In the 18th century, contractual liability was based
on reasonable expectation (reliance) rather than on promise. Promise was assigned
the role of an instrument of justification. Thus the moral theory which held the field
for over a generation made its exit in the middle of the nineteenth century. Slowly a
distinction between law and morality was made. Later on it was felt that the contracts
should be enforced so as to prevent disappointment of well-founded expectations.

From perhaps the 13th century on, English common law dealt with contractual
problems primarily through two actions: debt and covenant. When a fixed sum of
money was owed, under an express or implied agreement, for a thing or a benefit
given, the money was recoverable through a simple action at debt. Other debt action
was available for breach of a promise, made in an instrument with a seal, to pay a
fixed sum of money. A so-called action at covenant could also be brought, but only
for breach of a promise under seal. These actions did not, however, provide a
remedy for the breach of an informal agreement to do something. In the 15th century
the common-law courts started to develop a form of action that would render such
agreements enforceable, and by the middle of the 16th century they had done so
through the form of action known as assumpsit (Latin: “he has undertaken”).
Originating as a form of recovery for the negligent performance of an undertaking, it
came step by step to cover the many kinds of agreement called for by expanding
commerce and technology. Having established in principle a comprehensive remedy,
it was necessary for the courts to limit its scope. The courts found the limiting
principle in the doctrine of “consideration,” according to which a promise as a general
rule is not binding unless something is given or promised in exchange. This
consideration need not be of commensurate value, but it must be of some value,
must be bargained for, and cannot be simply a formality.
Personal Liability of an Agent to the Third Party.

These are as follows :

Where the agent expressly agrees : If an agent, while contracting with a third
party, expressly agrees to be personally liable on the contract, he can be held
personally liable for any breach of contract. For example , in the process of ordering
food like burger, pizza, snacks, etc from various local and famous delivery
companies like Zomato, Talabat, Uber eats, etc , they can be held responsible for
any late delivery or any problem with the packaging of food.

When the agent acts for a foreign principal : Where an agent contracts for the
sale or purchase of goods on behalf of a merchant residing abroad, he is presumed
to be personally liable. Example: In the process of purchasing various goods through
famous companies like Amazon, Flip-cart, etc , they act as an intermediate between
the customer and the foreign principal .

Where the agent acts for an undisclosed principal : Where an agent does not
disclose the name of the principal, he is personally liable. For example: when we
involve in the purchase of a painting or a piece of property, the agent acts as an
intermediate for an undisclosed principal.

When the agent acts for a principal who cannot be sued : An agent incurs
personal liability when he contracts on behalf of a principal who, though disclosed,
cannot be sued. Thus, an agent who contacts for an ambassador or foreign
sovereign, becomes personally liable. For example : When the principal is an
ambassador or a foreign principal like a minister or a president , this rule comes into
play that we cannot sue the principal .

Where the agent acts for a non-existing principal : When an agent enters into a
contract on behalf of a fictitious or non-existing principal, in such case, the agent is
personally liable on the contracts. No agent can bind a non-existent principal.
That is, the legal effect of an agent purporting to contract on behalf of a non-existent
principal is that the agent himself will be personally bound under that same contract
with the contractual counterparty.

Where an agent receives or pays money by mistake or fraud : When an agent

pays some money by mistake or fraud, he has a right to recover it back from the
receiver. Similarly, when a third party pays to an agent some money under mistake
or fraud, the agent can be sued for refund of the amount.
Here, the example of fake insurance agencies or bank agencies can be applied,
where they collect money by committing fraudulent practices. In such a case, these
agencies can be sued.

When an agent has an interest in the subject matter of the contract : Where an
agent himself has an interest in the subject-matter of the contract, the Where an
agent himself has an interest in the subject-matter of the contract, the agent is
personally liable to the extent of his interest in the subject-matter.

When the agent exceeds his authority : When an agent exceeds his authority or
represents to have a kind of authority which he, in fact, does not have, he commits
breach of warranty of authority and is personally liable to third party for any loss
caused to him by reason of acting under the false representation.
Unauthorised acts by an agent will usually be acts which exceed his actual authority.
For example, an estate agent authorised to agree with a purchaser to a price
specified by the vendor will be committing an unauthorised act if he agrees to a price
which is lower than the specified price. Hence, an agent should comply strictly with
the terms of the agency agreement in order to avoid unauthorised acts.

Trade usage or custom : In certain cases, the trade usage or custom of trade
provides that the agent shall be personally liable for his acts. In such cases, the
agent is personally liable.

Where the agent signs a contract or a negotiable instrument in his own

name : Where the agent signs a negotiable instrument or a contract without making
it clear that he is signing on behalf of the principal, the agent will be personally liable
in that case.
An agent who signs a contract in his own name without qualification, though known
to be an agent, is understood to contract personally, unless , a contrary intention
plainly appears from the body of the instrument, and the mere description of him as
an agent, whether as part of the signature or in the body of the contract, is not
sufficient indication of a contrary intention to discharge him from the liability incurred
by reason of the unqualified signature. On the other hand, if words are added to the
signature, indicating that he signs " as an agent," or on behalf of the principal, he is
considered not to contract personally, unless it plainly appears from the body of the
contract, notwithstanding the qualified signature, that he intended to make himself a
party. Where an agent signed a charter-party in his own name without qualification
he was held personally liable, although he was described as an agent for named
principals. A similar decision was given in a case where the agent was described in
the body of the contract as " consignee and agent on behalf of" his principal, naming
him . On the other hand, the words "on account of" or "on behalf of" a named
principal in the body of the contract have been held sufficient to exclude personal
liability, notwithstanding an unqualified signature.
Lennard v. Robinson is an instance of a case where an agent was held personally
liable because he appeared as a contracting party in the body of the contract,
although he signed it "by authority of and as agent of" a named principal.
Remedies for Breach of Contract
When a contract has been broken, the party who suffers by such breach is entitled to
receive, from the party who has broken the contract, compensation for any loss or
damage caused to him thereby, which naturally arose in the usual course of things
from such breach, or which the parties knew, when they made the contract, to be likely
to result from the breach of it. Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the breach. When an obligation
resembling those created by contract has been incurred and has not been discharged,
any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default as if such person had contracted to discharge it
and had broken his contract.

The Indian Contract Act lays out all the provisions for the performance of a contract. It
also contains the provisions in case of breach of contract by either party. Let us take a
detailed look at the available remedies for breach of contract.

Remedies for Breach of Contract

When a promise or agreement is broken by any of the parties we call it a breach of

contract. So when either of the parties does not keep their end of the agreement or
does not fulfil their obligation as per the terms of the contract, it is a breach of contract.
There are a few remedies for breach of contract available to the wronged party. Let us
take a look.

1] Recession of Contract

When one of the parties to a contract does not fulfil his obligations, then the other party
can rescind the contract and refuse the performance of his obligations.As per section
65 of the Indian Contract Act, the party that rescinds the contract must restore any
benefits he got under the said agreement. And section 75 states that the party that
rescinds the contract is entitled to receive damages and/or compensation for such
a recession.

2] Sue for Damages

Section 73 clearly states that the party who has suffered, since the other party has
broken promises, can claim compensation for loss or damages caused to them in
the normal course of business. Such damages will not be payable if the loss is
abnormal in nature, i.e. not in the ordinary course of business. There are two types
of damages according to the Act,

 Liquidated Damages: Sometimes the parties to a contract will agree to the

amount payable in case of a breach. This is known as liquidated damages.
 Unliquidated Damages: Here the amount payable due to the breach of
contract is assessed by the courts or any appropriate authorities.
3] Sue for Specific Performance

This means the party in breach will actually have to carry out his duties according to the
contract. In certain cases, the courts may insist that the party carry out the agreement.

So if any of the parties fails to perform the contract, the court may order them to do so.
This is a decree of specific performance and is granted instead of damages.

For example, A decided to buy a parcel of land from B. B then refuses to sell. The
courts can order B to perform his duties under the contract and sell the land to A.

4] Injunction

An injunction is basically like a decree for specific performance but for a negative
contract. An injunction is a court order restraining a person from doing a particular act.

So a court may grant an injunction to stop a party of a contract from doing something
he promised not to do. In a prohibitory injunction, the court stops the commission of an
act and in a mandatory injunction, it will stop the continuance of an act that is unlawful.

5] Quantum Meruit

Quantum meruit literally translates to “as much is earned”. At times when one party of
the contract is prevented from finishing his performance of the contract by the other
party, he can claim quantum meruit.

So he must be paid a reasonable remuneration for the part of the contract he has
already performed. This could be the remuneration of the services he has provided or
the value of the work he has already done.
 CONCLUSION
In the topic of personal liability of an agent, we can understand that an agent is only
a intermediate party between the principal and the third party. An agent cannot by
his will start a contract nor make any changes in it by himself. Thus a contract can
only be started between a principal and his third party.

Agency, in law, the relationship that exists when one person or a party (principal)
engages another (the agent) to act for him- example., to do his work, to sell his
goods, to manage his business. The law of agency thus governs the legal
relationship in which the agent deals with a third party on behalf of the principal. The
competent agent is legally capable of acting for this principal vis-à-vis the third party.
Hence, the process of concluding a contract through an agent involves a two-fold
relationship.

A contract is an agreement or promise made between two or more parties that the
courts will enforce. In some cases, the agreement and promises made in a contract
are not kept by a party or more parties. Therefore, this situation is called a breach of
contract which means failure to keep promises or agreements of a contract. Breach
of contract is a legal cause of action in which a binding agreement is not honoured
by one or another more of the parties. There can be variety of reasons for breaching
a contract and the consequences of such a breach can be very serious, even if the
breach was unavoidable.

When a breach of contract happens, the parties who involved should find out the
remedies and consequences of breaching an enforceable contract. There are mainly
five remedies which are : sue for damages, sue for specific performance, recession
of contract, injunction and quantum merit.
 REFERENCES
1. The Indian Contract Act, 1872 by Fredreick Pollok and Mulla
2. https://www.toppr.com/guides/business-laws-cs/indian-contract-act-1872/
remedies-for-breach-of-contract/

3. https://www.owlgen.in/discuss-the-circumstances-under-which-an-agent-is-
personally-liable/

4. https://www.abyssinialaw.com/online-resources/study-on-line/item/418-historical-
development-and-economic-analysis-of-contract-law

5. https://en.m.wikipedia.org/wiki/History_of_contract_law

6. https://en.m.wikipedia.org/wiki/History_of_contract_law