Rights of Principal

To repudiate contract: (Sec 215) 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.

As a rule, an agent cannot deal on his account/. Only after obtaining the consent of the principal and full disclosure of all material facts, agent may act on his own account. However, where agent’s personal interest is to conflict with principal’s interest, he cannot act on his own account. Where the agent acts on his own account, principal has following rights:

1) he may repudiate the transaction
2) he may affirm the transaction and claim the benefits
3) he may claim damages for loss caused to him.

To claim benefit (Sec 216) if an agent without the knowledge of the 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.

The principal must show that a material fact has been dishonestly concealed or the dealing of an agent has been disadvantageous to him. All profits and advantages made by the agent in the business conducted by him for his principal must be paid over to the principal. Agent cannot make any secret profits or receive bribes. Principal is entitled to receive all such sums and also interest on them. The position of an agent being fiduciary in character, he cannot conflict his personal interest with his duty to the principal.

To ratify or disown agent’s acts: (Sec 196) where acts are done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or disown such acts.

To revoke agent’s authority: (Sec 203) the principal may revoke the authority given to his agent by giving a reasonable notice of revocation at any time before the authority has been exercised so an to bind the principal.

To claim loss or profit: (Secs 211 & 212) the principal is entitled to compensation for any loss sustained by him or to any profits accrued —

1) where the agent acts contrary to the directions given by the principal; or
2) where loss is caused due to agent’s neglect, want of skill, or misconduct.

To demand accounts: (Sec 213) Principal is entitled to demand proper accounts from the agent.

To refuse remuneration when agent is guilty of misconduct: (Sec 220) The principal has a right to refuse remuneration to the agent who is guilty of misconduct in the business of the agency.

Agent when personally liable?

In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf on his principal, nor is he personally bound by them (Sec 230). As a general rule, an agent who enters into a contract on behalf of his principal is not entitled to sue personally nor is he personally liable on the contract. An agent enjoys immunity from being personally sued. It is the principal who can enforce and can be held liable on a contract entered into by his agent.

However, an agent can personally enforce contracts or be personally liable in the following cases.

Where the principal is a foreigner: (Sec 230 (1)) Where the contract is made by an agent for sale or purchase of goods for a merchant resident abroad, the agent is personally liable. Contract to this effect shall be presumed to exist. In the case of foreign principals, this rule is adopted as the third party does not know the standing and credit of foreign principal. The credit is given to the agent. Foreign party is not a party to the contract at all. He can therefore neither sue nor be sued.

Where principal is undisclosed: (Sec 230 (2)) Where the agent does not disclose the name or existence of the principal, he is personally liable. Contract to this effect shall be presumed to exist. Where the agent has no authority to disclose, the name of the principal or existence of the principal, the principal is called an undisclosed principal. The agent also conceals the fact that he is acting as an agent. The third person should not know that the person is acting as an agent. Where the third person knows of the existence of the principal, disclosure of name is not essential and the agent cannot be made personally liable since the knowledge in such case is equivalent to disclosure. It must be noted that agent may either –

1) disclose the existence of the principal but not his name; or
2) he may neither disclose the existence nor the name of the principal .

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