208. When termination of agent's authority takes effect as to agent, and as to third persons.---The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

(a) A directs B to sell goods for him, and agrees to give B 5 per cent commission on the price fetched by file goods. A afterwards, by letter, revokes B's authority. B, after the letter is sent, but before he receives it, sells the goods for 100 rupees. The sale is binding on A and B is entitled to five rupees as his commission.

(b) A at Quetta, by letter, directs B to sell for him some cotton lying in a warehouse in Karachi, and afterwards, by letter, revokes his authority to sell, and directs B to send the cotton to Quetta. B, after receiving the second letter, enters into a contract with C, who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B the money, with which B absconds. C's payment is good as against A.

(c) A directs B, his agent, to pay certain money to C, A dies, and D takes out probate to his will. B, after A's death, but before hearing of it, pays the money to C. The payment is good as against D, the executor.

Time from which revocation operates.---Revocation by the act of the principal takes effect as to the agent from the time when the revocation is made known to him; and as to third persons when it is made known to them, and not before.

Except as to illustration (c), which removes an anomaly, this section is in accordance with the common law. When A trades as B's agent with B's authority (even though the business be carried on in A’s name, if the agency is known in fact), all parties with whom A makes contracts in that business have a right to hold B to them until B gives notice to the world that A’s authority is revoked; and it makes no difference if in a particular case the agent intended to keep the contract on his own account.

Illustration (c) follows the rule of the Roman law and systems derived from it against the English authorities, which are admitted to be unsatisfactory. Accordingly in acknowledgment, of a debt made by an agent, though after the death of the principal, binds the estate of the principal provided the creditor has no knowledge at the time of the death of the principal and the acknowledgment amounts to a "reasonable step (taken by the agent) for the protection and preservation" of the assets of the principal within the meaning of S. 209.

If the authority of an agent to admit execution of a document is revoked before the registration thereof, but such revocation is not known either to the grantee of the document or the registering officer, the document is not invalidated, though it is registered by the agent after the revocation of his authority.

209. Agent's duty on termination of agency by principal's death or insanity.---When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

There does not seem to be any English authority, and there are few Indian cases on the section. In Anand Behari v. Dinshaw & Co. it was held that the accountant of a bank on the verge of liquidation could not pray in aid the section as a justification for selling bank property after the death of the director of the bank. It had been urged that this was the only way in the circumstances to obtain ready cash for carrying on the bank’s business.

An agency is terminated under S. 201 by the death of the principal. If the agent thereafter continued in service of the principal’s heirs, a new agency is created. There is nothing in this section to indicate that the agency continues on the old terms.

210. Termination of sub-agent’s authority.---The termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent’s authority) of the authority of all sub-agents appointed by him.

As a general rule this is obvious. There may be cases where a substitute rather than a sub-agent has been appointed, and there appears by express agreement or by the nature of the case an intention that his authority shall not be determined when that of the original agent is revoked.

Illustrations

(a) A, an agent engaged in carrying on for B, a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investments. A must make good to B the interest usually obtained by such investments.

(b) B, a broker, in whose business it is not the custom to sell on credit, sells goods of A, on credit to C, whose credit at the time was very high. C before payment, becomes insolvent. B must make good the loss to A.

(c) An agent, instructed to warehouse goods at a particular place, warehouse a portion of them at another place, where they are destroyed, without negligence. He is liable to the principal for the value of the goods destroyed.

(d) An agent, instructed to insure goods, neglects to do so. He is liable to the principal for their value in the event of their being lost.

(e) A broker, entrusted with goods for sale, sells them by auction at an inadequate price, not having made an estimate of the value in accordance with the custom of the particular trade. He must make good the loss.

(f) An auctioneer, contrary to the usual custom, takes a bill of exchange in payment of the price of goods sold. He is liable to the principal for the amount of the bill in the event of its being dishonoured.

(g) An agent, bound by his contract to keep proper books of account, omits to scrutinize, examine or check the accounts of his subordinates whom he implicity trusts. Taking advantage of this, the subordinates commit gross frauds on him and his employers. The frauds and defalcations being due to the agent’s failure to perform his duty he is liable to make good the loss thereby caused.

It is not an agent’s duty to obey instructions which are unlawful. If, at a sale by auction without reserve, the auctioneer is instructed not to sell for less than a certain price, he is not liable to the principal for accepting the highest bona fide bid, though it may be lower than that price.

"If any loss be sustained."---Where an agent sells his principal’s goods in breach of his duty below the limit placed upon them by the principal, the measure of damages is the actual loss which the principal has sustained, and not the difference between the price at which they are sold and the limit of the price placed on the goods. Where no loss is suffered, the principal is entitled at least to nominal damages, the sale being wrongful.

The measure of damages where an agent, who had been instructed not to part with the possession of certain goods until they are paid for, parted with them without payment, was held to be the value of the goods, the purchaser having failed to pay the price.

Custom of trade.---According to the custom of trade in Bombay, when a merchant requests or authorises a firm to order and to buy and send goods to him from Europe, at a fixed price, net free godown, including duty, or free Bombay harbour, and no rate of remuneration is specifically mentioned, the firm is not bound to account for the price at which the goods were sold to the firm by the manufacturer. And it does not make any difference that the firm receives commission or trade discount from the manufacturer, either with or without the knowledge of the merchant.

Usage of the Bombay market known as the pakki adat system.---The following are the incidents of a contract entered into on pakki adat terms:---

(1) the pakka adatia has no authority to pledge the credit of the up-country constituent to the Bombay merchant, and no contractual privity is established between he up-country constituent and the Bombay merchant.

(2) The up-country constituent has no indefeasible right to the contract (if any) made by the pakka adatia on receipt of the order, but the pakka adatia may enter into cross-contracts with the Bombay merchant, either on his own account or on account of another constituent, and thereby for practical purposes cancel the same.

(3) The pakka adatia is under no obligation to substitute a fresh contract to meet the order of his first constituent.

The relation between the pakka adatia and the up-country constituent is not the relation of agent and principal pure and simple. The precise relation may thus be described in the words of Jenkins C.J.:---

"I think the contract between the parties was one of employment for reward, and the incidents proved appear to me to converge to the conclusion that the contract of a pakka adatia, in circumstances like the present, is one whereby he undertakes or, to use the word in its non, technical sense as business men on occasion do use it, guarantees that delivery should, on due date, be given or taken at the price at which the order was accepted, or differences paid: in effect he undertakes or guarantees to find goods for cash or cash for goods or to pay the difference.

"I do not say that there is no relation of principal and agent between the parties at any stage; there may be up to, a point, and that this is legally possible is shown by Mellish L.J. in Ex parte White where he speaks of ‘a person who is an gent up to a certain point.' So here there may have been that relationship in its common meaning for the purpose of ascertaining the price at which the order was to be completed, and to this point of the transaction all the obligations of that relation perhaps apply. But when that stage is passed, I think the relation is not that of principal and agent, but of the nature I have indicated. Into this contact there is imported by the evidence of custom no such element of unreasonableness as would compel us to reject it on that score. In Manilal Raghunath v. Radhakisson Ramjiwan Macleod C.J. said the only distinction between a pakka adatia and broker who is liable on his contracts is that the former does not contract as agent, but as principal; in other words the pakka adatia undertakes business for his principal, but the particular contracts by which he carries out that business are his own affair.

Bill of lading in the name of clearing agents---Clearing agent does not become owner of goods---Must act on instructions of his principal the real consignee.

Bank acting as clearing agent---Responsibility of. In a case where a bank in whose favour the drafts for the value of the goods have been endorsed also acts as a clearing agent, the responsibility of such a bank as a clearing agent is no more than that between a principal and agent under the Contract Act. In such cases, before any damages can be claimed from the agent, it is to be fully established that the agent concerned has acted carelessly and not in accordance with the duties imposed on him as an agent.

Principal present on spot---Agent cannot act independently of principal's directions---Loss due to inaction of plaintiff---Agent not liable.---Where the Mills ground flour for the Civil Supply Department. The atta being unmarketable at the beginning became unfit for human or cattle consumption, and created abnoxious smell. The C.S. Department refused to take any action on representation of Mill, who were forced to destroy the atta on protest of neighbours. The Government thereupon sued the Mill for the loss. Held: Civil Supply Department as principal being on spot, was duty bound to issue directions to plaintiffs, as agents, for disposal of atta. The stock of unsold atta having been destroyed in good faith, out of sheer necessity, and Civil Supply Department being negligent in the matter, plaintiffs were entitled to destroy it without any further communication with the authorities. No damages for the loss could be granted to the Government.

212. Skill and diligence required from agent. An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequence of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct.

Illustrations

(a) A, a merchant in Islamabad, has an agent, B, in London to whom a sum of money is paid on A's account, with orders to remit. B retains the money for a considerable time. A, in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest from the day on which it ought to have been paid, according to the usual rate, and for any further direct loss---as e.g., by variation of rate of exchange--but not further.

(b) A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquiries as to the solvency of B. B, at the time of such sale, is insolvent. A must make compensation to his principal in respect of any loss thereby sustained.

(c) A, an insurance broker, employed by B to effect an insurance on a ship, omits to see that the usual clauses are inserted in the policy. The ship is afterwards lost. In consequence of the omission of the clauses nothing can be recovered from the underwriters. A is bound to make good the loss to B.

(d) A, a merchant in England, directs B, his agent at Karachi who accepts the agency, to send him 100 bales of cotton by a certain ship. B, having it in his power to send the cotton, omits to do so. The ship arrives safely in England. Soon after her arrival, the price of cotton rises. B is bound to make good to A, the profit which he might have made by the 100 bales of cotton at the time the ship arrived, but not any profit he might have made by the subsequent rise.

Direct consequences of his own neglect.---As stated in the section, the loss is recoverable only if it is the direct consequence of the agent's negligence. In a case before the Supreme Court, the agent had been directed to insure the goods against fire, which he had failed to do. Owing to an explosion in the Bombay docks, the goods were destroyed. Under a fire insurance policy, such a loss was not recoverable, but tile Government passed an ordinance that compensation for goods which were insured against fire would be fully paid, and, if the goods were not insured against fire, only half the value of the goods would be paid. The agent obtained half the value of the goods from the Government, and it was held that he was liable to compensate his principal for the other half, as the loss inflicted upon the principal was the direct consequence of the agent's not insuring the goods as instructed, and it was immaterial whether the loss was foreseeable.

Gratuitous agent.---A gratuitous agent is liable for any loss sustained by his principal through the gross negligence of the agent. There is also liability for failing to exercise due care in offering gratuitous advice at all events where the defendant is a professional man, such as a doctor, solicitor, banker or valuer.

Clearing agent---Liability of.---When the clearing agent failed to conduct the work entrusted to him with as much skill as is generally possessed by persons engaged in similar business and he failed to act with reasonable diligence in this connection. He was held liable for the loss incurred by the principal on that ground.

213. Agent's accounts.---An agent is bound to render proper accounts to his principal on demand.

Agent's duty to account.---This duty is elementary, and will be enforced at need by following in the agent's hands property representing money for which he ought to have accounted. It is irrespective of any contract to that effect. It is not discharged by merely delivering to the principal a set of written accounts without attending to explain them and produce the vouchers by which the items of disbursement are supported, but where accounts have been sent by the agent to the principal, and the principal has kept. them with him for a length of time, the accounts will be considered stated and settled and will not be reopened unless instances of fraud are proved. If an agent neglects to keep proper accounts, everything consistent with established facts will be presumed against him in the event of his being called upon for an account of the agency. Where an agent mixes up his moneys with the moneys of his principal the onus clearly lies on the agent to prove that in any particular transaction which he claims to be his own he employed his own moneys. "The principle is well established that an agent entrusted with money or goods by a principal to be applied on his principal’s account cannot dispute the principal's title unless he proves a better title in a third person and that he is defending on behalf of and with the authority of the third person. The same principle controls the relation of bailor and bailee. Possibly the framers of the Contract Act may have passed it over as belonging to the general law of estoppel; in any case it is quite consistent with the Act.

The duty to account is owed by the agent to the principal, and not to other persons. Thus an agent appointed by the administrator of the estate of a deceased person to recover outstanding debts due to the estate is not liable to account on the contract of agency to the person entitled to the estate, and it makes no difference that representation was granted to the administrator as attorney of the mother and guardian of the person entitled to the estate.

When a minor comes to Court to have an account taken as between himself and his agent, and it is found on taking that account that the agent has made certain advances to the guardian, and advances have been applied for the benefit of the minor, the agent ought to be allowed these advances in taking the accounts. Here the plaintiff seeks relief from a Court administering equity, and he must do equity himself.

As to the form of a suit for an account between a principal and an agent, see the undermentioned cases. A decree may be passed in favour of an agent in a suit brought by the principal for accounts. In fact in some circumstances, an agent may maintain an action against his principal for accounts. The right is based not upon statute but upon equity, and is available where the accounts are in the possession of the principal, and the agent does not possess any. A suit by a principal against his agent for an account, and also for recovery of money that may be found due from him, is governed by Limitation Act, 1908, Sch. I, Art. 89.

Where an agent enters into a contract with a third person in his own name, and subsequently sues on the contract and obtains a decree, the principal is not entitled to maintain a suit for a declaration that he is beneficially interested in the decree and to recover the amount thereof from the judgment-debtor. The fact that the principal is entitled to an amount from the agent does not entitle him to maintain a suit of this kind. He could have adopted the contract and sued on it himself; after a decree is passed for the agent, he is too late.

Liability of representative of agent to account.---The legal representative of an agent cannot be called upon to render accounts to the principal in the same sense as the agent himself. The remedy of the principal is to sue the representative for any loss he may have suffered by remedy of the negligence or misconduct of his agent. In other words, the suit is not one for accounts strictly so called, but a suit for money payable to the principal out of the estate of the agent. If a suit for accounts is instituted against an agent, but he dies while the suit is pending, it can be proceeded with against the legal representative, and the latter is bound to deliver books of account, papers and vouchers, but cannot be called upon to explain the ad-counts, and the onus shifts to the plaintiff to prove the realisation of items by the deceased.

Suit for accounts against legal representative of agent---If lies---Remedy open to principle.---A suit for recovery of the money misappropriated by a trustee or agent will lie against the legal representatives of the agent and in such a suit the decree will be against the assets of the deceased agent or trustee. A suit for recovery of a specified sum of money however, does not assume the character of a suit for accounts merely because in the determination of the question in controversy accounts may have to be examined. The sole foundation for a suit for account is the obligation to account and where that does not exist, the suit for money cannot be regarded as a suit for accounts.

Then the question arises what is the remedy of the principle against the representatives of the agent. It is not at all tenable that the estate of the agent, who has not tendered accounts to his principal in a case of this description is to sue the representative of the agent for any losses he may have suffered by reason of the negligence, misconduct, misfeasance or malfeasance of his agent; in other words, the suit is not one for accounts strictly so called but a suit for money payable by the representatives of the agent out of his assets in their hands. The contention that the liability is personal and had expired, on the death of the agent is not well founded.

Suit for accounts---When lies---If suit for accounts lies against the legal representative of the agent. A suit for account will lie if the defendant is under an obligation to account and an obligation to account arises only;

(i) if the person upon whom the obligation is sought to be imposed has received some kind of property not belonging to himself;

(ii) that the person seeking to impose the liability must be the owner or must have some title to that property as would enable him to recover it;

(iii) that the defendant must have received the property in his possession and control and;

(iv) there must be fiduciary relationship between the plaintiff and the defendant.

Section 213, Contract Act, provides that an agent is bound to render account to his principal on demand and this duty will be enforced by following in the hands of the agent the properties representing the money for which he ought to have accounted. The liability to account is irrespective of any express contract to that effect. It is well settled on principle that the liability of an agent is personal and the deceased agent's legal representatives cannot be required to render accounts in the same sense in which the agent himself might have been called upon to do. The reason seems to be that the legal representatives of the deceased cannot be required to discharge the duty to explain matters of which they have no personal knowledge and they cannot assist the principal in the investigation of the management of his estate of which they are wholly ignorant and they cannot be asked to do that which does not lie within their power and they should not be required to do something which is impossible. The rights and remedies of the principal against the agent and on the death of the agent against his representatives are not identical.

The legal representative of an agent does not stand in a fiduciary relationship with the principal. So a suit for account is not maintainable, against him.

214. Agent's duty to communicate with principal.---It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.

Agent is under a duty to consult principal in a "difficult" situation so as to save repudiation of his action by principal---Held: Present was a case of "difficulty" visualised by S. 214 and agent under second power of attorney should have sought instructions of principal of controversial first power of attorney.

Attorney---Obligations of---Held: Notwithstanding authority to alternate principal's property, attorney to use all reasonable diligence in communicating with principal and seeking to obtain his instructions in cases of difficulty---Agent dealing on his own account with property under agency---Held: Consent of principal to be obtained in that behalf after acquainting him with all material circumstances on subject failing which principal to be at liberty to repudiate transaction.

Expressions 'in cases of difficulty' and 'deals on his own account' as visualised by Ss. 214 & 215 and as applicable to facts of the cases discussed.

Power of attorney---Suit though filed directly by the plaintiff but endorsement made at the end of the plaint showed that plaintiff had appointed three persons as her attorney through a registered general power of attorney who, or any one of them would look after her interests after her departure from the place of filing of suit---During pendency of suit another person moved an application for withdrawal of suit before Trial Court asserting that he held another power of attorney from the plaintiff, which empowered him to withdraw the suit---Trial Court, without issuing notice to the plaintiff or to attorneys under the first power of attorney, dismissed suit as withdrawn---Held, order of the Trial Court was passed on the back of the plaintiff without her knowledge---Had the plaintiff or her representatives been present, they would have brought existence of the contents of first power of attorney to the notice of Trial Court and if the Court would have noticed the first power of attorney it would have certainly examined the various questions with regard thereto; including question whether power of attorney was irrevocable and whether it conferred any right on any of the parties which could not be taken away by a subsequent power of attorney---If the person holding subsequent power of attorney when seeking withdrawal/dismissal of suit filed by his principal or otherwise acting under the second power of attorney was doing so on his own account then he was required by law to seek consent of principal plaintiff so as to save repudiation of his action by the principal---Plaintiff and other three persons who were appointed as attorneys by the first power of attorney were also necessary parties in the application for withdrawal of the suit made by holder of second power of attorney---Notice to the principal plaintiff and attorneys under the first power of attorney by the Court was also essential---Trial Court, by not doing all that, acted with material irregularity in circumstances---Order of Trial Court was set aside.

215. Right of principal when agent deals, on his own account, in business of agency without principal's consent.---If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.

(a) A directs B to sell A's estate. B buys the estate for himself in the name of C. A, on discovering that B has bought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material fact, or that the sale has been disadvantageous to him.

(b) A directs B to sell A’s estate. B, on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B informs A that he wishes to buy the estate for himself, but conceals the discovery of the mine. A allows B to buy in ignorance of the existence of the mine. A on discovering that B knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option.

For like reasons an agent for sale or purchase must not act for the other party at the same time, or take a commission from him unknown to the principal, or settle any claim of his against the principal on exorbitant terms thereby to increase his own profit. An agent must give his principal the free and unbiassed use of his own discretion and judgment.

A principal who seeks to set aside a transaction on the ground that the provisions of the section has been violated must take proceedings for that purpose within a reasonable time after becoming aware of the circumstances relied on.

In fact, the special provisions of the Trusts Act Ss. 51-54, are more stringent. However, where an agent dealt on his own account in the business of the agency and bought the goods of his principals in the name of a dummy, it was held that the fraudulent concealment of his identity and the fact that he was competing in the same market brought the case within the present section.

Purchase by agent of goods given to him for sale---Transaction not 'ipso facto' void---Principal ratifying transaction---Transaction becomes valid. A purchase or sale made by the commission agent of his own goods for or to his principal without disclosing that fact is not ipso facto for failure to disclose a material fact. The words "dealings of the agent have been disadvantageous to him"...mean disadvantageous in fact and not a mere possibility of their being disadvantageous. Whether such a contract is disadvantageous or not must be decided on the facts of each case and no presumption arises. Therefore where the transaction is subsequently ratified by the master, it cannot be challenged as void or invalid.

216. Principal's right to benefit gained by agent dealing on his own account in business of agency.---If an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction.

A directs B his agent, to buy a certain house for him. B tells A, it cannot be bought, 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.

Principal's rights to profits.---If a person, while holding a fiduciary position and acting in that capacity, makes a profit without fully disclosing his interest to those persons towards whom he stands in such a position, he must account to them for that profit; and it is immaterial that in acquiring the profit the agent may have run the risk of loss, and that the principal may have suffered no injury. Accordingly, if an agent for sale receives a share of commission or extra profit from the buyer's agent without the knowledge of his own principal, the principal can recover the sum of money received to his use. The principal can also recover from the agent and from the person who bribed him under the name of commission or otherwise, jointly and severally, damages for any loss sustained by the principal by reason of entering into the contract, e.g., an addition fraudulently made to the price of goods bought through the agent in order to give the agent a secret profit. Recovery of the illicit profit from the agent is no bar to an action for further damages against the third person. The relation which arises in such cases between the agent in default and the principal is that of debtor and creditor, not of trustee and beneficiary. The ordinary law of limitation is applicable, the time running from the principal's discovery of the facts, and the special rules as to following trust money into its investments do not apply. Interest is recoverable on bribes and on all secret profits received by the agent.

Where an agent has in effect bought from his principal, a subsequent purchaser from the agent with knowledge of the agency is in no better position against the principal than the agent himself.

Forfeiture of commission.---An agent who has wrongfully dealt on his own account is obviously not entitled to recover any commission for the transaction, even if the principal adopts it, for the principal could forthwith recover it back from him under this section or the equivalent common law rule. Moreover he had no authority to make a contract with himself, and therefore has earned nothing as agent. The principal's option of ratifying the unauthorised transaction does not give the agent any better right.

Knowledge of principal.---A transaction of this kind may be approved or ratified by the principal, but it must be upon full disclosure. It is not enough for the agent to tell the principal that he has some interest of his own. He must disclose all material facts, and be prepared to show that full information was given and the agreement made with perfect good faith. Notice sufficient to put the principal on inquiry will not do. Thus where an agent employed to buy goods sells his own goods to the principal at a price higher than the prevailing market rate, the principal is entitled to repudiate the transaction, and he is not bound by a ratification made in the absence of knowledge that the agent was selling his own goods and was charging him in excess of the market price.

It is open to the principal whose agent has bargained for a secret profit of commission to adopt the transaction, if he thinks fit, for the purpose of suing the third party and recovering for himself the sum promised by him to the agent, or any part of it which the agent has not received.

Payments authorised by custom.---The law of the present section does not interfere with the customary mode of remunerating an agent, in certain branches of business, by a discount or percentage which is ultimately paid by the third party and not by his own principal. Here the agent's position is almost that of an officer of a market paid by a toll on the goods dealt with. Such allowances are constant in brokerage and insurance business and are so well known that no special consent on the principal's part is needed to cover them. They are included in the agent's general authority to do business in the usual manner. "If a person employs another, who he knows carries on a large business, to do certain work for him, as his agent with other persons, and does not choose to ask him what his charge will be, and in fact knows that he is to be remunerated, not by him, but by the other persons, which is very common in mercantile business, and does not choose to take the trouble of inquiring what the amount is, he must allow the ordinary amount which agents are in the habit of charging. These charges being allowed on a fixed scale to all persons employed in that kind of business alike, and notorious, are not obnoxious to the rule against secret profits and corrupt allowances.

Agreements against agent's duty void.---An agreement between an agent and a third person which comes within the terms of the present section, or in any way puts the agent's interest in conflict with his duty, is not enforceable unless the principal chooses to ratify it.

An agreement whereby the defendant agreed to remunerate an executor appointed under her brother's will out of her own pocket for undertaking the duties of executor, which he declined to do without remuneration, does not create such an interest at variance with the duties imposed upon executors as to render the agreement illegal on the ground of public policy.

217. Agent's right of retainer out of sums received on principal's account.---An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.

COMMENTS

The right conferred in terms by this section is in the nature of retainer, and assumes the agent to have money for which he is accountable to the principal in his hands or under his control. S. 221 (below) further gives the agent a possessory lien on the principal's property in his custody. Nothing in the Act expressly gives him an equitable lien, i.e. a right to have his claims satisfied, in priority to general creditors, out of specific funds of the principal which are not under his control. Such a right, however, may exist in particular cases. In the special case of a solicitor it is well settled that a judgment which he has obtained for his client by his labour or his money should stand, so far as needful, as security for his costs, and he is entitled to have its proceeds pass through his hands. The Court will not allow any collusive arrangement between parties to deprive the solicitor of this benefit. But intention to defraud the successful party's solicitor is not presumed from the mere fact of the action being settled without his assistance. It seems doubtful, however, whether this rule can properly be regarded as having anything to do with the general law of agency, and therefore whether it can furnish any safe guidance for our present purpose.

The language of this section is not very well fitted to cover damages and costs for which the principal may be liable to indemnify the agent trader S. 222, but it is hardly possible to suppose that it would not be held to do so.

Business.---The word "business" in this section means the same business or a continuing business. Hence money received by an agent in one business cannot be retained by him on account of remuneration alleged to be due to him in a different business altogether which had long since been completed.

218. Agent's duty to pay sums received for principal.---Subject to such deductions, the agent is bound to pay to his principal all sums received on his account.

Mode of payment.---It follows from this rule that an agent to receive money has generally no authority to receive anything else as equivalent. As between the principal and a third person, a set-off or balance of account between that person and the agent in his own right is not a good payment to the agent on behalf of the principal. The debtor must pay in such a manner as to facilitate the agent in transmitting the money to his principal. It seems that an alleged custom to the contrary cannot be sustained. If money is paid to an agent on his principal’s account by a person who is also indebted to the agent personally, the agent is not entitled to appropriate the money to his own debt, but must pay it over to the principal. Nor is an agent, who has received money on the principal’s account, entitled to set up against the principal claims made by third persons in respect of the money.

Payments in respect of illegal transaction.---If an agent receive money on his principal's behalf under an illegal or void contract, the agent must account to the principal for the money so received, and cannot set up the illegality of the contract as a justification for withholding payment, which illegality the other contracting party had waived by paying the money.



219. When agent's remuneration becomes due.---In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually complete.

"Special contract."---When there is an express contract providing for the remuneration of the agent, the amount of the remuneration and conditions under which it becomes payable must primarily be ascertained from the terms of that contract. No other contract inconsistent therewith, whether founded on custom or usage or otherwise, can be implied; but evidence of a particular usage may be given for the purpose of incorporating provisions that are not inconsistent with the terms of the express contract.

"Completion of such act."---The question whether or not an agent is entitled to commission has repeatedly been litigated and it has usually been decided that, if the relation of buyer and seller is really brought about by the act of the agent, he is entitled to commission although the actual sale has not been effected by him. In other words, the commission becomes due if the broker has induced in the party for whom he acts the contracting mind, the willingness to open negotiations upon a reasonable basis. And the right to brokerage is not lost even though a change or modification of the terms of the contract is made between the buyer and seller without the intervention of the broker. A broker employed to procure a loan on property becomes entitled to his commission if he finds a party willing to advance the money, even if the contract were afterwards to go off from the caprice of the lender, or from the infirmity of the title. Whether the other party to the contract ultimately formed has been brought into relation with the principal by means of the agent's intervention is a question of fact. It is not necessary to establish his claim that he should have been the other party's first or sole source of information. But in order to establish a claim for commission the agent must show that the transaction in respect of which the claim is made was a direct result of his agency. It is not sufficient to show that the transaction would not have been entered into but for his introduction. He must go further, and show that his introduction was the direct cause of the transaction.

Agent prevented from earning remuneration.---If, in breach of a contract, express or implied, with an agent, the principal, by refusing to complete a transaction or otherwise, prevents the agent from earning remuneration, the agent is entitled to damages; and in such case the measure of damages, where the agent has done all that he undertook to do, is the full amount of remuneration that he would have earned if the transaction had been duly completed, or the principal had otherwise carried out his contract.

Where a purchaser has agreed with the agent to pay a certain price, although the agent has no power to conclude a sale, and the owner subsequently sells to that very purchaser at a lower price, the agent is entitled to commission on the sum originally offered, not merely on the lower price. The agent is also entitled to his commission if he introduces a purchaser with whom the owner concludes a contract, even though the owner is subsequently induced by the purchaser to release the latter from his obligations. The agent is also entitled to his remuneration if a legally binding contract is concluded, even though the purchaser never pays the price. Where the authority of an agent is revoked after it has been partly exercised or after the agent has attempted to exercise it, the question whether he is entitled to a quantum meruit for the work previously done depends upon the terms of the contract of agency, and the custom or usage of the particular trade or business.

Express contract for remuneration.--Where the terms of remuneration are contained in a writing, the agent is not entitled to remuneration unless all conditions imposed by the writing have been fulfilled.

220. Agent not entitled to remuneration for business misconducted.---An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.

(a) A employs B to recover 100,000 rupees from C and to lay it out on good security. B recovers the 100,000 rupees and lays out 90,000 rupees on good security, but lays out 10,000 rupees on security which he ought to have known to be bad, whereby A loses 2,000 rupees. B is entitled to remuneration for recovering the 100,000 rupees and for investing the 90,000 rupees. He is not entitled to any remuneration for investing the 10,000 rupees, and he must make good the 2,000 rupees to B [sic in the Act, but it should obviously be A.]

(b) A employs B to recover 1,000 rupees from C. Through B's misconduct the money is not recovered. B is entitled to no remuneration for his services, and must make good the loss.

Negligence may disentitle an agent to recover even advances and disbursements out of pocket. A principal is entitled to have an honest agent, and it is only the honest, agent who is entitled to any commission. Accordingly where an agent for sale, having sold the property, retained half the deposit as commission with the principal's consent, and also, without the principal's knowledge, received a commission from the buyer, the agent was held liable not only to account for the secret commission to the principal but the return the usual commission, which he had retained. But an agent who retains discounts received by him from third persons, in the honest belief that he is entitled to retain them, does not thereby forfeit his commission, although he may be liable to account for the discount as profits received without the knowledge or consent of the principal. And even if an agent makes fraudulent overcharges in respect of some transactions, that will not disentitle him to commission on other separate and distinct transactions in which he has acted honestly.

Agent or bailee wrongfully converting property---Not entitled to any charges for keeping the property with him. The question is whether a bailee who has wrongfully converted the property of another person is entitled to claim any charges for service rendered by him for the goods kept with him. It is a well established rule of law that an agent is not entitled to claim any amount due to him for services rendered if he has been guilty of any misconduct or of any wrongful act in the discharge of his duties. This principle is embodied in section 220 of the Contract Act. Therefore where a bailee, who is in the position of an agent wrongfully converts the property lying with him he would not be entitled to any charges for keeping the property with him prior to the conversion.

Bailer wrongfully convering goods---Not entitled to any charges for services rendered in relation to the goods. The principle embodied in S. 220 is that an agent is not entitled to claim any amount due to him for services rendered if he has been guilty of any misconduct or of any wrongful act in the discharge of his duties.

221. Agent's lien on principal's property.---In the absence of any contract to the contrary an. agent is entitled to retain goods, papers and other property, whether moveable or immoveable, of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for to him.

Agent's lien.---One practical consequence of this rule is that a buyer of property from an auctioneer, or other agent known to be in possession of the property and entitled to a lien on it, cannot act up payment to the principal as a defence to an action for the price at the suit of the agent. Similarly a subsequent charge given by the principal to a third person will be postponed to a factor's lien. It seems that property is sufficiently "received" by an agent for the purpose of this section when there has been any dealing with it amounting to delivery to him under S.90 (b). An auctioneer, employed to sell furniture at the house of the owner, is sufficiently in possession of the furniture to entitle him to a lien thereon for his charges and commission. But a lien cannot be acquired by a wrongful act. The possession of the property, therefore, must be obtained by the agent lawfully in order that a lien, whether general or particular, may attach. If he obtains it by misrepresentations, or without the principal's authority, he has no lien thereon. Nor, where property is entrusted to an agent for a special purpose, can the agent claim any lien, the existence of which is inconsistent with such purpose.

The lien claimable under this section is confined to commission, disbursements, and services in respect of the specific property on which lien is claimed.

How far lien effective against third persons.---The lien, whether general or particular, of an agent attaches only to property in respect of which the principal has, as against third persons, the right to create a lien, and, except in the case of money and negotiable securities, is confined to the rights of the principal in the property at the time when the lien attaches, and is subject to all rights and equities of third persons available against the principal at that time. It seems unnecessary to give illustrations of this rule or to multiply authorities, which are numerous, because an agent's lien being founded on a contract, express or implied, with the principal, it obviously follows that the law must be as stated. In the case of moneys or negotiable securities, an agent's lien is not affected by the rights or equities of third persons, provided he receives them honestly, and has no notice of any defect in the title of the principal at the time when the lien attaches. This does not depend on any principal of agency, but on the rule that any person who takes a negotiable instrument in good faith and for value acquires a good title notwithstanding any defect in the title of the person from whom he takes it; a person taking such an instrument under circumstances giving him a lien thereon being considered a holder for value to the extent of the lien.

Lien of sub-agents.---A sub-agent who is employed by an agent without the authority, express or implied, of the principal has no lien, either general or particular. as against the principal. But a sub-agent who is properly appointed has the same right of lien against the principal in respect of debts and claims arising in the course of the sub-agency, on property coming into his possession in the course of the sub-agency, as he would have had against the agent employing him if the agent had been the owner of the property; and this right is not liable to be defeated by a settlement between the principal and agent to which the sub-agent is not a party if a sub-agent properly appointed has no knowledge that the person employing him is an agent, but believes on reasonable grounds, at the time when the lien attaches, that the agent is the owner of the property and is acting on his own behalf, the sub-agent's lien, whether general or particular, is available against the principal to the same extent as it would have been against the agent if the agent had been the owner of the property; and the lien is not in such a case limited to debts and claims arising in the course of the sub-agency. If, however, the sub-agent is aware of the existence of a principal at the time when the lien attaches, his general lien in respect of debts and claims not arising in the course of the sub-agency is available against the principal only to the extent of the lien, if any, to which the agent employing him would have been entitled had the property been in his possession.

How lien lost or extinguished.---The lien of an agent, being a mere right to retain possession of the property subject thereto, is, as a general rule, lost by his parting with the possession .Where possession is obtained from the agent by fraud, or is obtained unlawfully and without his consent, his lien is not affected by the loss of possession. And if possession is given to a bailee for safe custody, or for some other purpose consistent with the continuance of the lien, and the circumstances are such as to show that the agent intends to retain his rights, the lien will not be prejudiced by his parting with the possession. The lien of an agent is not affected by an order winding up the company whose agent he is. Therefore where the agent is in possession of property belonging to the company by virtue of his lien he cannot be required to deliver up possession to the official liquidator.

An agent's lien is extinguished by his entering into any agreement or acting in any character, inconsistent with its continuance; and may be waived by conduct indicating an intention to abandon it. Whether the taking of other security for the claim secured by the lien operates as a. waiver depends upon whether, having regard to the nature of the security, the position of the parties and all the other circumstances of the particular case, an intention to abandon the lien may be inferred.

The lien of an agent is not affected by the circumstances that the remedy for recovery of the debt or claim secured thereby becomes barred by the Statutes of Limitation, or that the principal becomes bankrupt or insolvent, nor by any dealing by the principal with the property subject to the lien, after the lien has attached.

222. Agent to be indemnified against consequences of lawful acts.---The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.

(a) B, at Singapore, under instructions from A, of Quetta, contracts with C to deliver certain goods to him. A does not send the goods to B and C sues B for breach of contract. B informs A of the suit, and A authorises him to defend the suit. B defends the suit, and is compelled to pay damages and costs and incurs expenses. A is liable to B for such damages, costs, and expenses.

(b) B, a broker at Quetta by the orders of A, a merchant there, contracts with C for the purchase of 10 casks of oil for A. Afterwards A refuses to receive the oil, and C sues B. B informs A, who repudiates the contracts altogether. B defends, but unsuccessfully and has to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs, and expenses.

Limits of agent's indemnity.---If an agent has, without his own default, incurred losses or damages in the course of transacting the business of his agency or in following the instructions of his principal, he will be entitled to full compensation therefor.....But it is not every loss or damage for which the agent will be entitled to re-imbursement from his principal. The latter is liable only for such losses and damages as are direct and immediate, and naturally flow from the execution of the agency.

The right of indemnity extends to losses or liabilities incurred in the exercise of the authority according to the rules and customs of the particular trade or market in which the agent is authorised to deal, provided the rule or custom in question is a reasonable one, or the principal had notice of it at the time when he conferred the authority, but if the rule or custom is unlawful or unreasonable, and was unknown to the principal, he is under no liability to indemnify the agent against the consequences of acting on it.

Ratification by the principal will cure the agent's default and restore his ordinary right to indemnity.

The present group of sections must be taken as supplementing, not as restricting, the rights of an agent under the general law regulating contracts of indemnity.

"Lawful".---A wagering contract is void, not unlawful (see S. 30). When therefore a suit is brought by a betting agent against his principal to recover a loss on betting paid by the agent, the principal cannot escape liability on the ground that the agent's act was unlawful.

If the agent has acted unlawfully, albeit innocently, he cannot recover under this section. There is nothing unlawful in an agent contracting with a third party in his own name, even if not authorised to do so.

C.i.f. Contract with commission agent.---Though, under an ordinary c.i.f. contract between sellers and buyers, the tender of a bill of lading after the contract of affreightment has been dissolved by the outbreak of war is not such a tender as the buyers are bound to accept, such a tender is a good tender when goods are ordered through a commission agent "on account and at the risk of the principal, and the .principal is bound to accept the tender and pay for the goods. "To throw these goods on the agent's hands and leave them to bear the loss which has arisen by reason of the out-break of war while the goods were in transit appears to be entirely opposed to, and inconsistent with, the general principles of the law of agency.

Agent and principal---Scope and extent of agents authority extends to all lawful acts for purposes of agency---Consequences of acts of agent---Principal's liability to indemnify agent---Agent furnishing Bank guarantee to a person on behalf of principal for performance of contract---Guarantee encashed on account of default of principal---Agent filing suit against principal for recovery of guarantee money and compensation for loss of commission and interest---Principal, held, liable to indemnify agent against lawful acts done by him.

223. Agent to be indemnified against consequences of acts done in good faith.---Where one person employees another to do an act and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it cause an injury to the rights of third persons.

Illustrations

(a) A, a decree-holder and entitled to execution of B's goods, requires the officer of the Court to seize certain goods, representing them to be the goods of B. The officer seizes the goods, and is sued by C, the true owner of the goods. A is liable to indemnify the officer for the sum which he is compelled to pay to C in consequence of obeying A's directions.

(b) B at the request of A, sells goods in the possession of A, but which A had no right to dispose of. B does not know this, and hands over the proceeds of the sale to A. Afterwards C, the true owner of the goods, sues B and recovers the value of the goods and costs. A is liable to indemnify B for what he has been compelled to pay C, and for B's own expenses.

Unlawful acts.---The preceding section deals with indemnity against the consequences of lawful acts; this section with the consequences of unlawful acts done in good faith. It is clearly settled that an agent cannot claim indemnity in respect of acts which he knows to be unlawful, even if they are not criminal, whether on an express or implied promise. Any such promise is void as being contrary to public policy.

224. Non-liability of employer of agent to do a criminal act.---Where one person employs another to do an act which is criminal, the employer is not liable to the agent, either upon an express or all implied promise, to indemnify him against the consequences of that act.

(a) A employs B to beat C, and agrees to indemnify him against all consequences of the act. B thereupon beats C, and has to pay damages to C for so doing. A is not liable to indemnify B for those damages.

(b) B, the proprietor of a newspaper, publishes, at A's request, a liable upon C in the paper, and A agrees to indemnify B against the consequences of the publication, and all costs and damages of any action in respect thereof. B is sued by C, and has to pay damages, and also incures expenses. A is not liable to B upon the indemnity.

The rule in the text is elementary. Illustration (b) seems to assume that every libel for which damages can be recovered is also a crime, or, in other words, that defamation as defined in the Penal Code includes all the cases in which a civil action for injurious words is maintainable. We are not aware of any authority for such an assumption. An indemnity against damages for libel is now a common clause in agreement with publishers in England, and we have not heard of any one suggesting that such a term is invalid as being against public policy. Probably the true construction of the section is that it only applies where the act is criminal on the part of the agent, which in most cases would amount to the same thing as saying that it must be criminal to his knowledge. The rule could hardly be held to apply to a crime committed by means of an innocent agent.

225. Compensation to agent for injury caused by principal's neglect.---The principal must make compensation to his agent in respect of injury caused to such agent by the principal's neglect or want of skill.

A employees B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskillfully put up, and B is in consequence hurt. A must make compensation to B.

This, as a general rule, needs no proof or illustration. But the agent may be disentitled to relief if the injury was due to his own contributory negligence. This subject belongs to the law of civil wrongs.

An agent is not, generally speaking, entitled to sue the principal on any contract made on his behalf, even if the agent is personally liable on the contract to the third party. If a merchant resident abroad employs an agent to buy goods, and the agent buys them and gives his own acceptance for the price, he cannot sue the principal as for goods sold, because the contract between them is not one of buying and selling, but of agency. Similarly, if a broker buys goods on behalf of an undisclosed principal, he cannot sue the principal for non-acceptance of the goods, or for goods bargained and sold. His only remedy is an action for indemnity under S. 222. There is an exception to this rule in the case of policy brokers, who, by custom, are entitled to sue their principals for premiums due under policies effected on their behalf, though the brokers may not have paid the premiums nor settled with the underwriters in respect thereof.

226. Enforcement and consequences of agent's contracts.---Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.

(a) A buys goods from B knowing that he is an agent for their sale, but not knowing who is the principal. B's principal is the person entitled to claim from A the price of the goods, and A cannot, in a suit by the principal, set off against that claim a debt due to himself from B.

(b) A being B's agent, with authority to receive money on his behalf, receives from C a sum of money due to B. C is discharged of his obligation to pay the sum in question to B.

This section assumes that the contract or act of the agent is one which, as between the principal and third persons, is binding on the principal. If the contract is entered into or act done professedly on behalf of the principal, and is within the scope of the actual authority of the agent, there is no difficulty. It is immaterial in such a case what may be tile motive of the agent. The principal is bound though the contract may be entered into or act done fraudulently in furtherance of the agent's own interests, and contrary to the interests of the principal, provided the person dealing with the agent acts in good faith. This does not depend on the principal of estoppel, and it is immaterial whether the third person has any knowledge of the existence or extent of the agent's actual authority or not. With regard to contracts and acts which are not actually authorised, the principal may be bound by them, on the principal of estoppel, if they are within the scope of the agent's ostensible authority; but in no case is he bound by any unauthorised act or transaction with respect to persons having notice that the actual authority is being exceeded. This subject is dealt with by S. 237, below, and the commentary thereon.

The expression "contract" includes a promissory note. A authorises B to execute a promissory note on his behalf in favour of C. B executes the note by putting a mark described in the note as "nishani (mark) of A." A is bound by the note.

This section does not touch the conditions under which the agent can sue or be sued on the contract in his own name, as to which see Ss. 230-234, below. The principal must be able to show that the third party dealt with the agent as such.

Power of Attorney Act (VII of 1882), S. 2---Expression "thing so executed and done" used in S. 2, Power of Attorney Act, 1882---Significance---Agent (donee of power of attorney) is alter-ego of the principal---Primary purpose of power of attorney---Every "general" power of attorney on account of such description does not mean and include the power to alienate/dispose of property of principal---Deed of power of attorney to be strictly construed.

Power of Attorney Act (VII of 1882), S. 2---Civil Procedure Code (V of 1908), S. 101---Conclusion reached concurrently by two Courts below, on the terminology of deed of general power of attorney, that the authority to institute suit had not been conferred on agent being one of pure fact and had not been shown to have resulted from any misreading or non-reading and was also eminently justified---Question about conferment or otherwise of authority on agent to institute suit on behalf of principal, held, really got concluded with finding duly recorded in the appeal below and existence of such a power would not be capable of being re-opened in second appeal.

227. Principal how far bound, when agent exceeds authority.---When an agent does more than he is authorised to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal.

A being owner of a ship and cargo, authorises B to procure an insurance for 4,000 rupees on the ship. B procures a policy for 4,000 rupees on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo.

COMMENTS

The principal is not bound by the unauthorised acts of his agent but is bound where the authority is pursued, or so far as it is distinctly pursued. This and the following section must be read subject to S. 237, below.

Agent---Work done by agent in excess of authority---Requirements---Where agent did more than he was authorized to do part whereof, being within his authority and same could be separated from that part which was beyond his authority, work done in accordance with authority, held, would be binding as between such agent and principal.

228. Principal not bound when excess of agent's authority is not separable.---Where an agent does more than he is authorised to do, and what he does beyond the scope of his authority cannot be separated, from what is within it, the principal is not bound to recognise the transaction.

A authorises B to buy 500 sheep for him. B buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A may repudiate the whole transaction.

Further illustrations are supplied by Indian cases.

A authorises B to draw bills to the extent of Rs. 200 each. B draws bills in the name of A for Rs. 1,000 each. A may repudiate the whole transaction.

A instructs B to enter into a contract for the delivery of cotton at the end of January. B enters into a contract for delivery by the middle of that month. A is not bound by the contract, and any custom of the market allowing B to deviate from A's instructions will not be enforced by the Court.

229. Consequences of notice given to agent.---Any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal.

(a) A is employed by B to buy from C certain goods of which C is the apparent owner, and buys them accordingly. In the course of the treaty for the sale, A learns that the goods really belonged to B, but B is ignorant of that fact. B is not entitled to set off a debt owing to him from C against the price of the goods.

(b) A is employed by B to buy from C goods of which C is the apparent owner. A was, before he was so employed, a servant of C, and then learnt that the goods really belonged to D, but B is ignorant of that fact. In spite of the knowledge of his agent, B may set off against the price of the goods a debt owing to him from C.

COMMENTS

The rule laid down in this section is intended to declare a general principal of law. It is not a mere question of constructive notice or inference of fact, but a rule of law which imputes the knowledge of the agent to the principal, or in other words, the agency extends to receiving notice on behalf of his principal of whatever is material to be stated in the course of the proceedings.

But by the terms of the present section, which are cited in the same judgment, the application of the principle is limited by the condition that the agent's .knowledge must have been obtained "in the course of the business transacted by him for the principal.

The knowledge of an agent is not imputed to the principal unless it is of something that it is his duty as agent to communicate to the principal. It is not the duty of a policy broker, employed to effect an insurance, to communicate to his principal material facts coming to his knowledge in relation to the subject-matter of the proposed insurance, but only to make disclosure of all such facts to the insurers; and, accordingly, where a broker failed to effect a desired insurance, and another broker was employed, who succeeded, it was held that the Policy could not be avoided on the ground of the non-disclosure of a material fact which had come to the knowledge of the first mentioned broker, but of which neither the principal nor the broker who effected the policy was aware. Nor will notice given to or information acquired by an agent of circumstances which are not material to the business in respect of which he is employed be imputed to the principal.

An important exception to the rule that the knowledge of an agent is equivalent to that of the principal exists in cases where the agent has taken part in the commission of a fraud on the principal. In such cases notice is not imputed to the principal of the fruad or the circumstances connected therewith, because of the extreme improbability of a person communicating his own fraud to the person defrauded. On this ground it has been held that notice will not be presumed to have been given by an attorney to his client where such notice would involve a confession by the attorney of a fraud practised by himself. But the exception does not apply where the fraud is committed, not against the principal, but against a third person. And the mere fact that an agent has an interest in concealing facts from his principal is not sufficient to prevent his knowledge of those facts from being imputed to the principal, if it is his duty to communicate them. Where, however, the person seeking to charge the principal with notice was aware that the agent intended to conceal his knowledge, such knowledge will not be imputed to the principal.

It is to be observed that notice through an agent is not the same thing as constructive notice and should not be confused with it. The agent's knowledge is imputed to the principal without regard to any question of what the principal in person knew or might have known. Such is not the nature of constructive notice. A man is said to have constructive notice of that which he is treated as having known because, though not proved to have actually known it, he might and ought to have known it with reasonably diligent use of the means of knowledge at his disposal. Now an agent's constructive as well as his actual notice may be imputed to the principal in any transaction where constructive notice has to be considered at all. On the whole, then, a man may have notice either by himself or by his agent, and that notice may be either actual or (in an appropriate case) constructive.