Definition of Mercantile Agent
A Mercantile Agent is defined under Section 2(9) of the Indian Sale of Goods Act, 1930. It refers to an agent who, in the customary course of business, has the authority to sell goods, consign goods for sale, buy goods, or raise money on the security of goods. The distinguishing feature of a mercantile agent is that their authority arises not only from the principal’s instructions but also from the established trade practices in which they operate. This makes their role vital in commercial transactions as they act as intermediaries between buyers and sellers.
Legal Characteristics and Authority
The scope of a mercantile agent’s authority includes the power to bind the principal in contracts related to goods. As per Section 27 of the Sale of Goods Act, even if a mercantile agent sells goods without the owner’s express authority, the buyer may obtain a good title provided the agent was acting in the ordinary course of business and the buyer acted in good faith. This principle protects third parties in trade who rely on the apparent authority of such agents. Hence, mercantile agents enjoy broader powers compared to ordinary agents, especially in the context of the sale of goods.
Importance in Commercial Transactions
Mercantile agents are crucial in large-scale trade and commerce because principals cannot always directly engage in every transaction. Their legal recognition ensures smooth functioning of business activities and builds trust between trading parties. By empowering mercantile agents, the law balances the interests of principals and third-party buyers, minimizing disputes over ownership and validity of sales. Their role is particularly significant in industries where goods are sold and moved frequently, such as shipping, warehousing, and wholesale trade.
Real-Life Example
Suppose Rahul appoints Ajay, a commission agent, to sell 100 bags of rice. Ajay, being a mercantile agent, sells the goods in the open market to genuine buyers. Even if Rahul later disputes Ajay’s authority, the buyers are protected under Section 27, since Ajay acted in the ordinary course of his mercantile business. This ensures that commerce is not disrupted by internal disagreements between principals and agents.
Mnemonic to Remember – “S-P-B”
To easily recall Mercantile Agent, think S-P-B:
- S = Sell goods
- P = Pledge goods / raise money
- B = Buy goods
Think: “A Mercantile Agent helps in S-P-B: Sell, Pledge, Buy.”
About lawgnan:
Master the concept of the Mercantile Agent under the Sale of Goods Act, 1930 with clear explanations, legal insights, and practical examples at Lawgnan.in. Understand how agents gain authority to Sell, Pledge, and Buy (S-P-B) goods in the ordinary course of trade, protecting both principals and third parties. Our resources simplify complex provisions like Sections 2(9) and 27, making them exam-ready for LLB students. Visit Lawgnan.in today to explore in-depth law notes, case laws, previous year question papers, and mnemonics tailored to help you excel in your law exams with confidence.
