47. A is B’s agent for buying goods. B pays money to A for the purchases. A, however, as agent purchases goods on credit from C. Can C recover the price from A?

1. Facts of the Case

• A is appointed as agent by B to purchase goods.
• B provides money to A for purchasing the goods.
• Instead of paying cash to the seller, A purchases goods on credit from C.
• Question arises whether C can recover the price from A personally, or whether B alone is liable under the contract.

2. Issues in the Case

1. Whether A acted within the scope of authority by purchasing goods on credit instead of using the money provided.
2. Whether C can hold A personally liable for the payment of price.
3. Distinction between acts within authority and acts beyond authority (ultra vires) by an agent.
4. Whether B can be held liable to C for the credit purchase.

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Provisions:

• Section 182, Indian Contract Act, 1872 – Liability of Principal and Agent:
  “Where a person acts as an agent for another, the principal is bound by the acts of the agent within the scope of authority.”
• Section 184, Indian Contract Act, 1872 – Liability of Agent for Acting Without Authority:
  “An agent who contracts without authority is personally liable on the contract unless the other party knows that he is acting for a principal.”
• Section 187, Indian Contract Act, 1872 – Agent Acting in Excess of Authority:
  “If an agent acts beyond authority, he is personally liable to the third party for the consequences.”

Legal Principles and Analysis:

1. Authority of Agent:
   • A was appointed to buy goods with money supplied by B.
   • Purchasing goods on credit exceeds the authority, unless expressly allowed.
2. Liability of Agent:
   • Since A acted beyond authority (credit purchase instead of cash), he is personally liable to C.
   • B is not liable, because he did not authorize A to purchase on credit.
3. Knowledge of Third Party:
   • If C knew that A was acting for B but did not know about the lack of authority, sometimes principal may be bound.
   • Here, it is assumed C agreed to sell on credit to A, so A is liable.
4. Case Law References:

• Hely-Hutchinson v. Brayhead Ltd. (1968) 1 QB 549:
  • Principal is bound by acts of the agent within authority; agent is liable if acting beyond authority.
• Burr v. Brown (1843) 2 Man & G 94:
  • Agent who contracts without authority is personally liable to third party.

4. Possible Judgement

• A was instructed to purchase goods with money provided by B.
• Purchasing on credit was beyond his authority.
• Therefore, A is personally liable to pay C.
• B cannot be held liable since he did not authorize the credit purchase.
• C can recover the price from A, not from B.

Judgement:

• Yes, C can recover the price from A personally.
• B is not liable, because A acted outside the scope of his authority.
• This emphasizes the liability of agents for unauthorized acts under the Indian Contract Act, 1872.

About lawgnan:

Learn how agent liability unauthorized actions are treated under the Indian Contract Act, 1872 at Lawgnan.in. If an agent acts beyond their authority, such as purchasing goods on credit without principal consent, the agent becomes personally liable to the third party. The principal cannot be held responsible unless the agent acted within authorized limits. Lawgnan.in provides detailed explanations, case law references, and practical insights to help businesses, principals, and agents understand their rights and liabilities. Protect your business by knowing when an agent’s actions bind the principal and when the agent alone is responsible.