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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

Tarun appoints Meera, a Kolkata merchant, as his agent to sell goods. Without telling Tarun, Meera buys the goods herself in the course of that agency and later resells them at a gain. Under the Indian Contract Act, 1872, what is Tarun entitled to do?

Tarun can claim from Meera any benefit that resulted to her from the transaction. When an agent deals in the business of the agency on her own account without the principal's knowledge, the Act entitles the principal to that benefit, so Meera's resale gain belongs to Tarun.

  1. AClaim from Meera any benefit that resulted to her from the transactionCorrect
  2. BClaim nothing, because Meera bore the risk of resale
  3. CClaim only the agreed commission back from Meera
  4. DClaim damages only if Meera made a loss on resale

Explanation

Where an agent, without the principal's knowledge, deals in the business of the agency on his own account instead of the principal's account, the principal may claim any benefit resulting to the agent from the transaction (Section 216). Meera's resale gain is therefore claimable by Tarun. The option limiting recovery to commission is wrong because the law entitles him to the whole benefit.

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