50. 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 an agent by B for the purpose of buying goods from C, a supplier.
• B, the principal, gives money in advance to A to pay for the goods.
• However, A, instead of paying cash, purchases the goods from C on credit in his own name.
• Later, C demands payment from A, as the purchase was made on credit.
• The question arises whether C can legally recover the price of the goods from A, the agent, instead of the principal B.

2. Issues in the Case

1. Whether A, the agent, is personally liable to C for the price of goods purchased on credit.
2. Whether C can recover the price from A, even though A acted as an agent for B.
3. What is the extent of the agent’s personal liability under the Indian Contract Act, 1872, when the purchase is made on credit.

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Provisions:

• Section 226, Indian Contract Act, 1872:
  Contracts entered into by an agent on behalf of the principal are binding on the principal.
• Section 230, Indian Contract Act, 1872 – Agent cannot personally enforce contracts nor be bound by them:
  In the absence of any contract to the contrary, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.
  Exceptions:
  1. When the agent acts for a foreign principal.
  2. When the agent does not disclose the name of the principal.
  3. When the principal cannot be sued.
• Section 235, Indian Contract Act, 1872:
  If a person falsely represents himself as an agent and causes another to contract with him, he is personally liable if there is no principal or authority.

Legal Analysis:

1. Agency Relationship and Authority:
   • A is B’s agent with proper authority to purchase goods on B’s behalf.
   • The money was already advanced by B for the purchase.
2. Purchase on Credit by Agent:
   • A purchased on credit, not using the money provided by B.
   • If C knew that A was acting as an agent for B, then C can claim payment from B, not A.
   • However, since A chose to purchase on credit without disclosing that he had funds, and in his own name, he becomes personally liable to C.
3. Application of Section 230:
   • Normally, agents are not personally liable for contracts made on behalf of their principals.
   • But if the agent chooses to act in a manner inconsistent with his authority or contracts personally, he incurs personal liability.
4. Application of Section 235:
   • By not revealing that he already had funds to pay and purchasing on credit, A impliedly represented that he was personally responsible for payment.
   • Therefore, C has a right to recover the amount from A.

Supporting Case Laws:

1. Keighley, Maxsted & Co. v. Durant (1901 AC 240) –
   When an agent contracts in his own name, even though on behalf of another, he becomes personally liable to the third party.
2. Sitaram Krishna v. Shankar (AIR 1952 Bom 235) –
   An agent who does not disclose his principal or acts beyond authority can be personally liable for the contract.
3. Lamb v. Attenborough (1862) 1 B&S 831 –
   When an agent purchases goods in his own name, the seller may treat the agent as the principal and hold him liable for the price.
4. Pannalal Jankidas v. Mohanlal (AIR 1951 SC 144) –
   The principal is bound when the agent acts within authority, but if the agent acts beyond or inconsistently with instructions, he may be personally liable.

4. Possible Judgement

• A acted as an agent for B, but instead of paying the seller C with the money provided, he chose to purchase the goods on credit.
• By doing so, A effectively made himself personally liable to C.
• C was justified in believing that A was personally responsible for payment since the goods were sold on credit to A directly.
• B, the principal, is not bound to pay C because A did not follow instructions and did not disclose the truth about having funds to pay in cash.

Judgement:

• C can recover the price from A, since A purchased goods on credit and created a personal liability through his conduct.
• A cannot deny personal responsibility by claiming agency, as he acted beyond his authority and departed from the instructions of his principal.
• Therefore, A is personally liable to pay C for the goods.

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