AGENCY:

(1) MOHIRI BIVEE VS DHARMODAS GHOSH – Indian Kanoon

Case Name – MOHIRI BIVEE VS DHARMODAS GHOSH

Citation: 30 C;539; 7 C.W.N; 541;5 Bom, L.R. 421

Introduction:
This is one of those cases which throws light on the requirements to make a valid contract.
Minor agreement is void ab initio is emphasized here.
Facts of the case:
1. Bhramo dutt was a money lender in Calcutta. One minor Dharmo Dass entered into a
contract with.
2. He took Rs 20,000 from him and mortgaged his house in security against it.
3. Since Bhramo dutt was not there, the transaction was done by his attorney,Kedar
Nath.
4. Dharmo Dass’s mother was the guardian at that time of the property under the order
of court.
5. Dharmo Dass returned only Rs. 8000 and refused to return the same.
6. In 1895 mother of Dharmo Dass and a next friend filed case stating that any contract
with minor is void ab initio and hence not liable to pay the money.
7. The lower court granted relief to plantiff
8. Appeal was made in Calcutta High court.
Issues: what is the nature of minor’s agreement?
Judgement:
1. Minors are not eligible to enter into contract u/s 11 of the contract act. Hence any
contract with a minor is void ab initio.
2. All the requirements u/s 11 of the Indian Contract Act,1872 has to be fulfilled in order
to constitute a valid contract.

(2) Watteau v Fenwick (1893)

Facts

 A pub owner named Humble appeared to own and manage a pub

 Humble in fact acted for an undisclosed principal, when he ordered cigarettes from
the claimant, and failed to pay for them
 Humble was not authorised to purchase cigarettes by virtue of his actual authority
 Apparent authority and undisclosed principals are incompatible

Issue

 Was the undisclosed principal liable to the cigarette vendor?

Decision

 Yes

Reasoning

 Purchasing cigarettes was within the range of acts usually carried out by a landlord,
therefore the defendants were bound
 Opinion: this case undermines the doctrine of apparent authority, as there is no
apparent possible source for the representation: at the time of the purchase of
cigarettes, the principal did not exist and so obligations could not be conferred
thereon; it is either plainly wrong, or there is an alternate justification for apparent
authority which has not since been mentioned in litigation

(3) De Bussche v. Alt (1878);

Facts: C owned a ship and wanted to sell it in the Orient, but C was based in the
Isle of Wight. C arranged for D (who was a partner in a merchant shipping firm in Japan) to
sell the ship on his behalf for at least $90,000. D knew a Japanese prince. Prince was
prepared to pay $160,000. D should have said yes, but D bought the ship himself for
$90,000 and then sold it to the prince, making a profit of $70,000.
Decision: D should have been acting as an agent for C. He was expected to act in C's best
interests, not his own. Runs contrary to the fiduciary expectation so he was breach of
fiduciary duty. He had to account for the $70,000 to C.

(4)B. Mahinder Das vs P. Mohan Lal And Anr. on 16 November, 1938

Equivalent citations: AIR 1939 All 187 a
Author: M Ismail

JUDGMENT Mohammad Ismail, J.

1. This is a defendant's appeal arising out of a suit brought for the recovery of Rs.
387 or such amount as may be found duo to the plaintiffs. Plaintiff 1, Pt. Mohan
Lal, is admittedly the owner of the houses in question in Mussoorie. The plaintiff
2, Bhagwan Dass & Co. Ltd., were appointed agents by plaintiff 1 to lease the houses
in the year 1933. The plaintiffs' case is that plaintiff 2 appointed the defendants as
agents on behalf of plaintiff 1 to rent the houses and agreed to pay them
commission at the rate of 21/2 per cent, on the amount of rent realized, that the
defendants rented the three houses placed under their agency for a total sum of Rs.
2550,. that out of the said amount Rs. 2145-10-0 was paid to plaintiff 1 but the
balance, Rs. 269-6-0, was still due, that apart from the above mentioned sum the
plaintiffs claimed Rs. 17-10-0 which sum the plaintiffs were entitled to by way of
remission in respect of the house tax of "Fenloe" from the City Board but the said
sum was not recovered owing to the negligence of the defendants. The suit was
resisted by the defendants on, various grounds. It was pleaded inter alia that there
was no privity of contract between plaintiff 1 and the defendants as the latter were
appointed sub-agents by( plaintiff 2 who alone was entitled to sue, that the original
contract entered into between the parties was modified by another contract under
which it was stipulated that-the nominal rental value of the threes houses would be
deemed to be Rs. 1800.. That any sum that the defendants realized over and above
that amount would be divided half and half between the plaintiffs and the
defendants after deducting a sum of Rs. 250 which would be payable to a. third
person through whose exertions the rents of the houses would be raised. The trial
Court decreed the suit in favour of plaintiff 1 for Rs. 500-2-0, that is, for a sum
larger than was originally claimed by the plaintiffs. The defendants preferred an
appeal from the decree of the trial Court with the result that the lower Appellate
Court reduced the amount to Rs. 323. The defendant now comes to this Court in,
appeal.

This principle has been codified in Section 194, Contract Act, which provides:

Where an agent, holding an express or implied authority to name another person

to act for the principal in the business agency, has named another person
accordingly, such person is not a sub-agent, but an agent of the principal for such
part of the business of the agency as is entrusted to him.

Section 190 of the Act lays down:

An agent cannot lawfully employ another to perform acts which he has expressly
or impliedly undertaken to perform personally unless by the ordinary custom of
trade a sub-agent may, or, from the nature of the agency, a sub-agent must, be
employed.

HELD: The trial Court has remarked that it was admitted (by the parties) that it is
the owner's duty to let the Hoard know who his agent was. Neither the owner,
namely plaintiff 1, nor his agent plaintiff 2 ever took the trouble of applying to the
City Board for the refund of this amount. Under these circumstances I am satisfied
that the defendants are not responsible to make good the loss to the plaintiffs. in
the result I modify the decree of the Court below and reduce the decretal amount
by Rs. 17-10-0 only. In other respects the appeal fails and is dismissed. Under the
special circumstances of the case I order the parties to bear the costs of this Court.
Costs of the Court below as in the decree of that Court. Leave to appeal is refused.

(5) Keighley Maxted & Co. v. Durant

[1901] AC 240

(Undisclosed Principle)

FACTS:

K & Co authorized Roberts, a corn merchant, to buy wheat on a joint account for
himself and them at a certain price. Roberts, on his own behalf and without
authority of anybody else, bought wheat at a higher price than the authorized one,
from Durant. The intention that he was acting for K& Co. as well as himself was not
disclosed by Roberts to Durant. K & Co, however, later agreed with Roberts to buy
the wheat at that (high) price but eventually failed to do so. Durant resold it at a
loss and sued them for loss.

Durant – Plaintiff at court of 1st instance

Roberts – appellant in Court of appeal, respondent in House of Lords.

K & Co – appellant in House of Lords.

ISSUE:

Whether a contract made by a man purporting and professing to act on his own
behalf alone, and not on behalf of a principal, but having an undisclosed intention to
give the benefit of the contract to a third party, can be ratified by that third party, so
as to render him able to sue or liable to be sued on the contract.

HELD:

Day J. and a special jury ( favoured K& Co. and Durant)

It dismissed the action against the appellants (K& Co.) on the ground that there was
no ratification in law of the contract, and gave judgment against Roberts for the
amount claimed.

COURT OF APPEAL (favoured Robert)

It reversed the decision as regards the appellants, and ordered a new trial on the
ground that there was evidence for the jury that Roberts contracted on behalf of
himself and the appellants.

*It, for the first time, asserted the proposition that a contract made by a man in his
own name, intending it to be on behalf of a third party who has not authorized it but
keeping his intention secret, can be ratified by that third party so as to make himself
able to sue or liable to be sued on the contract.

(6) Gokal Chand-Jagan Nath vs Nand Ram Das-Atma Ram on 21

October, 1938

The appellants are a firm of merchants carrying on business at Sialkot. The

respondents are a firm of commission agents in Calcutta, who, from between 1919
and 1922, were employed by the appellants to conduct transactions for the
purchase and sale of sugar and the purchase of gunny bags. The question in this
appeal relates to three transactions executed by the respondents on behalf of the
appellants in accordance with this course of business. These transactions were duly
closed by the respondents with the other parties, and in the result three sums of
money were respectively due on the balance of the transactions from Diwan Chand-
Amar Chand Rs. 1,275, from Chatter Bhuj Dossa Rs. 8,670, from Kalu Ram-
Kanhaya Lal Rs. 510. This was the position when the transactions were closed in
October, 1920. But the three parties were in financial difficulties, and in the result
the respondents succeeded in obtaining payment of a part only of this
indebtedness. This action was brought to recover from the respondents the
differences between the sums due from the third parties and the sums of
indebtedness set out above. The largest debtor was the firm of Chatter Bhuj Dossa,
from whom in the result when the firm became insolvent in May, 1922, there was
still a considerable sum outstanding. The respondents had taken hundis on account
in March, 1921, and renewals in October, 1921, but no cash payment had been
obtained save Rs. 764-15-3. The hundis which were taken were in the respondents'
favour, and included sums other than those due in respect of the transactions
conducted for the appellants. The respondents as commission agents had in the
ordinary course in each case conducted the transactions in their own name and
taken a settlement from the third party for the whole balance of the account
between them and that party, themselves apportioning that total sum between
their different constituents, including the appellants. The appellants, for whom
they had acted on that account, were not consulted before the hundis were taken,
nor did they give any express authority to the respondents to accept hundis. The
claim in the action was to recover the outstanding balance due to the appellants
from the third parties, after giving credit in reduction for money actually recovered
and paid over to the appellants by the respondents. The course of business in
regard to the other two firms was the same, save that in their cases the debts for
the balance became ultimately time-barred.

HELD: The Subordinate Judge held that the respondents were liable to pay to the
appellants the sums not recovered from the third parties, on the ground that the
respondents, as agents, in giving credit to the third parties instead of recovering
money from them, did so at their risk, especially if the third parties' financial
position was shaky, and were therefore answerable to the appellants as their
principals for the amounts of the debts ultimately not recovered. In other words,
he held that the agent was liable for the loss accruing to the principal by the
insolvency of the debtor to whom he had given long credit. He also dealt with
questions of interest and other matters of account. From this judgment appeal was
taken to the High Court. That Court reversed the judgment of the Subordinate
Judge, apart from questions of interest, to which reference will be made later.

3. The High Court were unable to accept the statement of principle which has been
quoted above as the principle on which the Subordinate Judge proceeded. In their
opinion, the true principle was that the duty which the respondents as agents owed
to the appellants, their principals, was to exercise due care, skill and judgment in
getting in what they could by making the best bargain possible under the
circumstances. The Court held that in the present case it was for the appellants as
plaintiffs to prove that the respondents as defendants had failed in that duty, and
had been guilty of negligence, and that they had failed to do so. On the contrary the
Court held on the evidence that it was established that the respondents did all that
was reasonably possible, and that it was no fault of theirs that the realisations were
not larger than they were. They accordingly varied the judgment of the Subordinate
Judge by reducing the decretal amount to Rs. 5,919-8-3, which represented the
money actually collected by the respondents in respect of the three debtors,
together with interest from the date of the institution of the suit until payment at
six per cent per annum.

(7) Peyare Lal vs Mt. Misri And Anr.

This is a defendant's appeal and arises out of a suit brought by the plaintiffs-
respondents for declaration that the house described in the plaint belonged to
them. There was a firm Kure Mal Kallu Mal. Bhagwan Das and Durga Prasad were
its partners. The property in dispute, as has been found by both the lower Courts,
belonged to this firm. On 17th August 1933 Bhagwan Das sold the property in
dispute to the plaintiffs. On the next day, that is 18th August 1933 the same
property was sold by Durga Prasad to the defendant. Both the sale deeds were
registered on the same day, 18th August 1933. The firm was subsequently dissolved
by an award, dated 24th July 1935. The defendant contended that the plaintiff's
sale deed was invalid inasmuch as Bhagwan Das had no right to sell the partnership
property. The trial Court found that, though Bhagwan Das had no right to sell the
property to the plaintiffs yet the sale was ratified in the arbitration proceedings by
Durga Prasad and therefore the plaintiffs' sale deed was valid. On appeal the
decision of the trial Court was upheld.
(8) SURAJ M AL-CHANDAN MAL versus FA T E H CH AN D -JAIM AL R AI
(9) Pannalal Jankidas Vs. Mohanlal and Anr.
Citation: AIR 1951 SC 144

Facts

Plaintiffs, as agents of the defendants had stored the goods in Government godowns,
requiring permit to supply them to the defendants. In the meanwhile, due to the fire
in godown, the goods got burned up and plaintiffs got compensation of 50% of
damage caused in respect of the goods as they were uninsured. However, plaintiffs
sued defendants to be indemnified against the rest 50% of damages caused to the
goods while handling those as latter’s agent. The defendants pleaded, and it was
found as a fact that plaintiffs had agreed to insure the goods and even
charged defendants, nevertheless omitted to insure the goods; they further
pleaded that they were entitled to set off or counter claim for the value of the goods
destroyed as damages caused to them by the neglect or breach of duty of the
plaintiffs.

Issues: What damages are plaintiffs liable to pay to the defendants for failure to
insure the goods which were destroyed?

Contention of the Plaintiffs:

 The intervention of Government in passing this Ordinance could not increase or

add to the liability of the appellants for the breach of contract or breach of duty
and therefore they were not liable to pay the compensation which would have
been receivable by the respondents if the goods had been insured.
 Granting that they were in default and had committed a breach of duty in not
insuring the goods according to the instructions or the agreement, defendants
could not recover anything more from them than the nominal damages for
breach, because the policy of fire insurance, if taken out, would not have given
to the defendants money in respect to damage due to fire in godown. For this
purpose they relied on a statement Mayne on Damages as follows:

“Therefore if an agent is ordered to procure a policy of insurance for his principal and
neglects to do it, and yet the policy, if procured, would not have entitled the principal,
in the events which have happened, to recover the loss or damage, the agent may
avail himself of that as a complete defence.”

In the alternative it was argued on their behalf that the intervention of Government
in passing this Ordinance broke the chain of causation and could not increase or add
to the liability of the appellants for the breach of contract or breach of duty and
therefore they were not liable to pay the compensation which would have been
receivable by the respondents if the goods had been insured.

(10) WILLIAMS V ROFFEY BROS. & NICHOLLS (CONTRACTORS) LTD.

Facts:

Roffey has contracted to Shepherds Bush Housing Association to renovate 27 flats in

London. They subcontracted carpentry to Lester Williams for £20,000 payable in
instalments. Williams ran in financial difficulty and needed more money to continue
the work. Roffey was going to be liable under a penalty clause for late completion, so
they decided that they will make extra payment to the Carpenter. Williams continued
with work, but 3500£ was still missing. Roffey contracted new carpenters,

Issue

1. Can there be sufficient consideration for a pre-existing duty?

Decision

Held that Williams provided sufficient consideration, because Roffey received 'practical
benefit and was not enforced

Reasons

Glidewell held Williams had provided good consideration. The test for understanding
whether a contract could legitimately be varied was set out as follows:

1. A has a contract with B for work

2. Before it is done, A has reason to believe B may not be able to complete

3. A promises B more to finish on time

4. A "obtains in practice a benefit, or obviates a disbenefit" from giving the

promise

5. There must be no economic duress or fraud

The practical benefit of timely completion, even though a pre-existing duty is

performed, constitutes good consideration.

Ratio

A pre-existing duty to the promissor can be legally sufficient consideration if there is

a practical benefit to the promissor.

(11) Nensukhdas Shivnaraen vs Birdichand Anraj

The plaintiffs consigned 440 bales of Malkapur cotton from Malkapur to the
defendants in Bombay for sale on commission, and the defendants advanced
against the bales 80 to 85 per cent.of the then market value of the cotton. The
railway receipts were handed to a firm of Muccadams, Damji Hirji and Co., who
took delivery of the bales and stored them on their jetha at Colaba. Damji Hirji and
Co. failed on the 30th of September 1913. At that date 300 of the plaintiffs' bales
were accounted for by the defendants but the remaining 140 bales were missing
and not accounted for. The defendants subsequently recovered 23 out of these 140
bales. The learned Judge finch, and it is not disputed, that Damji Hirji and Co.'s
transactions were, towards the close of their business career, thoroughly
fraudulent. The learned Judge remarks bales cannot be stolen and the only
explanation given for the heavy loss of bales in Damji Hirj's charge is that he either
with or without the connivance of his direct principal, the commission agent, sold
a very large number of bales, falsified his accounts, and misappropriated the
proceeds.

HELD: We think, therefore, that the fraudulent disposition by Damji Hirji and Co.
of the plaintiffs' bales took place after the instructions to sell the 140 bales and
therefore in a matter within Damji Harji and Co.'s authority. The defendants,
therefore, are liable. The particular act was not authorised, still, as the ac was done
in the course of employment which was authorised, the master is liable for the act
of his servant: see Citizens' Life Assurance Co. v. Brown (1904) A.C. 423 at p 427 :
73 L.J.P.C. 102 : 91 L.T. 739 : 20 T.L.R. 497 : 53 W.R. 176. The defendants probably
hoped to succeed in their cape that Damji Hirji and Co. had been appointed by the
plaintiffs. Apart from this point there seems no reason why they should not have
paid the plaintiffs for their looses in the same manner as they paid Ramdin
Ramruttan and as Lakhichand Ramchand paid his up-country constituents who
lost bales through Damji Hirji and Co.'s default.

PARTNERSHIP:
(1) Cox v. Hickman

Facts

Benjamin Smith and Josiah Timmis Smith carried on business as iron workers and
corn merchants under the name of B Smith & Son. They owed a lot of money to the
creditors and a meeting took place, amongst whom were Cox and Wheatcroft. A
deed of arrangement was executed by more than six-sevenths in number and value
of the creditors. The trusts were enumerated and the lease was fixed at 21 years.
They were to carry on business under the name of “The Stanton Iron
Company”. The deed also contained a clause which prevented them from suing the
Smiths for existing debts. Cox never acted as trustee, and Wheatcroft resigned after
six weeks after which no trustee was appointed.

The goods for the business were provided by Hickman who drew 3 bills of exchange,
which the business accepted but did not honour.
The suit was first tried in front of Lord Jervis who ruled in favour of the defendants.
The action was then taken to the Exchequer Chamber wherein three judges wanted
to uphold the judgement and the other three were for reversing it.

Issues

Whether there is a partnership between the traders who were in essence the
creditors of the firm.

Contentions

The counsel for Wheatcroft contended that:

1. There was no action against the appellant, as if Hickman had heard that Cox
and Wheatcroft were the trustees, he would have realized that Cox had never
been a trustee and Wheatcroft had resigned.
2. The ownership of the partnership never changed and was still owned by the
Smiths.
3. A qualified benefit derived from a trade does not make a person a partner in it.
Here, unless the profits are taken, there exists no partnership.

The counsel for Cox contended that:

1. The defendant can be held liable only if:

1.1 He put his name on the bill

1.2 Authorised someone else to put their name on the bill

1.3 Held himself to have given the authority

1. As to the first and third points he is not liable. As far as the second is
concerned, the defendant cannot be held liable unless an agency is proved.
2. It is up to the defendant to show that the plaintiff is a partner.

The counsel for Hickman contended that:

1. There was a contract of partnership under which business was to be carried

out for the benefit of creditors
2. The scheduled creditors are allowed to participate in the profits of the firm
thereby making them partners
3. Any one of the partners may bind all the others by the acceptance of the bills
in the regular course of business

Judgement
The deed gave special powers to the creditors. They were given the choice by
majority regarding whether or not the trade should be continued and making rules
and regulations as to the carrying out of that trade, which are the powers that
partners have.

The creditors, however, did not carry out the business of the trade when they could
have but let the trustees do the same. By this act f theirs, they did not make
themselves partners of the trade. If they had carried out they business they could
have made sure none of the trustees accepted the bill of exchange as they would be
the principals.

The deed in this case is merely an arrangement between the creditors and the
Smiths, to repay the creditors out of existing and future profits. This relationship
between the creditors and debtors is not enough to constitute a relationship
between a principal and agent. Trustees are liable as they are the agent by the
contract but the creditors are not the principals of the trustees.

Held

The decision of the Court of Common Pleas was reversed and the defendant’s were
not held liable.

(2) New India Assurance Company Ltd vs M/S Zuari

Indsustries Ltd. & Ors
 FACTS:
 complainant (respondent in this appeal) had taken Insurance Policies from
the appellant on 1.4.1998 in respect of its factory situated in Jauhri Nagar,
Goa. One policy was a fire policy and the other was a consequential loss due
to fire policy.
 4. On 8.1.1999 at about 3.20 p.m. there was a short circuiting in the main
switch board installed in the sub-station receiving electricity from the State
Electricity Board, which resulted in a flashover producing over currents. The
flashover and over currents generated excessive heat. The paint on the panel
board was charred by this excessive heat producing smoke and soot and the
partition of the adjoining feeder developed a hole. The smoke /soot along
with the ionized air traveled to the generator compartment where also there
was short circuiting and the generator power also tripped. As a result, the
entire electric supply to the plant stopped and due to the stoppage of electric
supply, the supply of water/steam to the waste heat boiler by the flue gases
at high temperature continued to be fed into the boiler, which resulted in
damage to the boiler.
 5. As a result the respondent -complainant approached the Insurance
Company informing it about the accident and making its claim. Surveyors
were appointed who submitted their report but the appellant-Insurance
Company vide letter dated 4.9.2000 rejected the claim. Hence the petition
before the National Commission.
 6. The claimant-respondent made two claims (I) Rs.1,35,17,709/- for
material loss due to the damage to the boiler and other equipments and (ii)
Rs.19,11,10,000/- in respect of loss of profit for the period the plant
remained closed.

HELD:

It was held by the High Court that this did not cover damage resulting from the
disturbance of the atmosphere by the explosion of a gunpowder magazine a mile
distant from the premises insured. We are in respectful disagreement with the
said judgment as the predominant view of most Courts is to the contrary.

(3) Vishnu Chandra vs Chandrika Prasad Agarwal And

Ors
3. Appellant as plaintiff filed a suit for dissolution of partnership and rendition
of accounts of a firm styled as 'Shyam Bracketing Udyog' having its principal
place of business at Etah in the State of Uttar Pradesh. The trial Court in this
suit granted relief of dissolution of firm effective from November 23, 1976,
and passed a preliminary decree for taking accounts. The defendants after
an unsuccessful appeal to the first appellate Court approached the High
Court in second appeal. The High Court allowed the appeal, set aside the
concurrent findings and dismissed the plaintiff's suit with costs throughout.
Hence this appeal by special leave.
4. 4. Plaintiff appellant filed the suit for dissolution of firm and rendition of
accounts alleging that the partnership was a partnership at will and by the
notice and by institution of the suit the firm stood dissolved effective from
November 23, 1976. The respondents resisted the suit alleging that the
partnership is not a partnership at will.
5. Accordingly this appeal is allowed and the judgment of the High Court is set
aside. The suit of the plaintiff is decreed as under:
6. 9. In substitution of the decree made by the trial Court it is hereby decreed
that plaintiff has retired from the firm 'Shyam Bracketing Udyog, Etah,'
effective from the date of institution of the suit. The partnership firm is not
dissolved. Accounts to be taken up to and inclusive of the day preceding the
date of institution of the suit. A preliminary decree to that effect be drawn
up. The trial Court to appoint Commissioner and to take follow up action.

(4) Snow White Food Product Pvt. Ltd. vs Sohanlal Bagla

And Ors
On April 20, 1960, or thereabouts, the plaintiff Snow White Food Product
Company Limited (shortened hereafter, as far as possible, into "Snow
White") entrusted, in Cal-cutta, the third defendant Shree Hanuman
Transport Company, a firm doing the business of "a common carrier of
goods for reward", with two consignments -- one containing 25 tins of S/c
refined groundnut oil and the other containing 400 tins of S/c Balloon
Brand Vegetable Pro-duct -- for carriage by road to self (Snow White) at
Raiganj and Islampur respectively in the district of West Dinajpur. The
Transport Company -- that is how I call the third defendant hereafter, as far
 as possible --"received and accepted" the two consignments "for reward"
with a view to reaching them to their destination and to Snow White too, as
desired. The contracts of carriage are evidensed by two consignment notes:
one bearing the number A 1202 for despatch to Raiganj, and another bearing
the number A 1203 for despatch to Islam-pur. Dated April 20, I960, both
were issued by the Transport Company. At the trial, they have been marked
exhibit B collectively. The Transport Company insured with the fourth
defendant, the New Assurance Company Limited, the goods covered by the
two consignment notes against loss and damage, among other things, during
transit. But these insurances were had "on account of and for the benefit of"
Snow White. Leaving aside the permutation of "alternatives" in which the
plaint seems to revel, the pith of Snow White's case comes to this. The
consignments were not delivered to Snow White --the Raiganj one at Raiganj
and the Islampur one at Islam-pur. Worse, the goods consigned so were
wrongfully disposed of and converted "to their own use" by alt the
defendants -- the Transport Company (the third defendant), its two partners
-- Sohanlal Bagla and Madanlal Poddar -- the first two defendants, and the
Insurance Company (as I call now and hereafter, as far as possible, the
fourth defendant).

HELD: he Transport Company's liability, as also that of Sohanlal and Madanlal

Poddar, are still there. Here is a tabular statement for that-

The nett invoice value of the goods ...

Less paid Rs. 16,610.17 nP.

Rs. 4,500 Rs. 12,110.17 nP.

Less payable by the Insurance Company to Show White in pursuance of this

judgment Rs. 5,053.63 nP.

Rs. 7,056.54 nP.

which, I hold, is the Transport Company's and the first two defendants' liability to
Snow While. It therefore gets Rs. 4,500 Res. 5,053.63

Hely-Hutchinson v Brayhead Ltd [1968]

Facts

 Hely-Hutchinson (also known as Lord Suirdale) injected money into his own
company, Perdio Electronics
 This injection was indemnified by a Mr Richards on behalf of Brayhead
 Mr Richards was serving as the managing director of Brayhead, but was only
formally engaged as its chairman
 Brayhead subsequently purchased Perdio Electronics, but Perdio still went
into liquidation
 Hely-Hutchinson csued on the basis of Mr Richards’ indemnity

Issue

 Could Hely-Hutchinson recover, did Mr Richards have the authority to give

the indemnity?

Decision

 Yes, yes

Reasoning

 Lord Denning: the judge (at first instance) was correct that in acting as
managing director, Mr Richardson had apparent authority to give the
indemnity, but he also had actual authority my virtue of the office he worked
in
 By working in (and being treated as working in) the office of a managing
director, actual authority as to all of the acts a managing director would
normally do exists unless it is otherwise limited

(6) Suraj Bahadur vs Mahadeo

The plaintiff's case was that on the 27th April, 1946, he, the defendant and a third
person named Anant Dattatray Ratna Parkhe had entered into a partnership for
the purpose of working mica mines at village Para, Tehsil Kekri, and for carrying
on business in that commodity by a partnership deed Ex. 3 which was executed at
Ajmer and registered there. It was decided between the parties to carry on the
business in the name of Malla and Company. This partnership continued for some
time when Ratna Parkhe withdrew from it on the 18th May, 1949, and executed a
deed of relinquishment to witness this, while the plaintiff and the defendant
continued the partnership under a new deed of partnership (Ex. 1) dated the 18th
May, 1949, which was registered at Kekri. Under this new deed, the shares of the
partners were fixed as ten annas for the plaintiff and six annas for the defendant in
a rupee from the 1st January 1949. It was further agreed between the parties that
the earlier partnership had resulted in loss to the tune of Rs. 33704/8/9 upto the
31st December, 1948, and that this would be first recouped from the profits, if any,
of the business of the partnership from the 1st January, 1949, and that none of the
parties would be entitled to take anything out of the profits of the partnership until
the same was recouped, whereafter they would be entitled to earn profits in the
proportion of ten annas and six annas in a rupee and would also be liable to pay
losses in the same proportion. It was further stipulated between the parties that the
plaintiff who was staying in Para would look after and manage the affairs of the
partnership and as such entitled to receive a remuneration of Rs. 100/- per
mensem out of the partnership funds, and similarly the defendant would be paid
at the rate of Rs. 100/- per mensem during his stay at Para in connection with the
partnership business. And apart from a certain provision which was made in
connection with two other persons Ganesh Mahadev Ratrekar and Vinayak
Mahadev Ratrekar who were stated to "be employed in the partnership with which
provision in the deed we are not concerned for the purposes of the present appeal,
the only other condition which it is necessary to mention is that the parties agreed
that they shall be bound by the conditions stated in the partnership deed dated the
27th April, 1946, already referred to as Ex. 3, obviously meaning thereby that those
conditions would govern the relationship of the parties in so far as no provision
was made to the contrary in the new deed of partnership. The plaintiff's case was
that in accordance with the terms of the original partnership, he alone had been
the financing partner with the result that he had invested a sum of Rs. 1,20,000/-
approximately in the business of the partnership. According to the plaintiff,
however, in spite of his best efforts to make the business of the partnership a
prospering one, it did not succeed and continued to run at a loss throughout.
Confronted with this situation, his case is that he made an offer to the defendant
that the latter might take it entirely on himself but the defendant did not agree.
Thereafter the plaintiff also alleges to have suggested to the defendant that the
partnership business might be sold to a third party who was prepared to purchase
it but the defendant did not agree to this either. Consequently, the plaintiff brought
the suit, out of which this appeal arises, for dissolution of the partnership business
and for rendition of its accounts. This suit was filed on the 20th January, 1951, in
the Court of the Sub-Judge, First Class, Kekri.
HELD:
The decree passed by the Courts below, therefore, requires to be amended in all
these respects. It is, therefore, declared that the proportionate shares of the parties
in the partnership will be ten annas for the plaintiff and six annas for the defendant
in a rupee. It is further declared that this partnership shall stand dissolved with
effect from the date of the preliminary decree, and it is ordered that all the accounts
shall be produced before the Commissioner to be appointed by the trial Court by
the plaintiff as well as by the defendant as the case may be. It is further ordered
that the following account shall be taken: (1) an account of the credits, property
and effects now belonging to the said partnership; (2) an account of the debts and
liabilities of the said partnership; and (3) an account of all dealings and
transactions between the plaintiff and the defendant not disturbing any
subsequent settled accounts; And it is ordered that the goodwill of the business
heretofore carried on by the plaintiff and defendant and the stock-in-trade be sold
on the premises and that the Commissioner may on the application of any of the
parties fix a reserved bidding for all or any of the lots at such sale and that either of
the parties will be at liberty to bid at the sale. And it is further ordered that the
above accounts be taken and all the other acts required to be done be completed
within three months from today or within such time as may be extended by the trial
Court and the Commissioner do certify the result of the accounts and that all other
acts are completed and have his certificate in that behalf ready for the inspection
of the parties at the end of the period pointed out above and thereafter the case
shall be fixed for making a final decree in due course.

(7)

(8) R.D. Saxena vs Balram Prasad Sharma

Appellant, now a septuagenarian, has been practicing as an advocate mostly in the

courts at Bhopal, after enrolling himself as a legal practitioner with the State Bar
Council of Madha Pradesh. According to him, he was appointed as legal advisor to
the Madhya Pradesh State Co- operative Bank Ltd. (Bank, for short) in 1990 and
the Bank continued to retain him in that capacity during the succeeding years. He
was also engaged by the said Bank to conduct cases in which the Bank was a party.
However, the said retainership did not last long. On 17.7.1993 the Bank terminated
the retainership of the appellant and requested him to return all the case files
relating to the Bank. Instead of returning the files the appellant forwarded a
consolidated bill to the Bank showing an amount of Rs.97,100/- as the balance
payable by the Bank towards the legal remuneration to which he is entitled. He
informed the Bank that the files would be returned only after setting his dues.

Correspondence went on between the appellant and the Bank regarding the
amount, if any, payable to the appellant as the balance due to him. Respondent
Bank disclaimed any liability outstanding from them to the appellant. The dispute
remained unresolved and the case bundles never passed from appellants hands. As
the cases were pending the Bank was anxious to have the files for continuing the
proceedings before the courts/tribunals concerned. At the same time the Bank was
not disposed to capitulate to the terms dictated by the appellant which they
regarded as grossly unreasonable. A complaint was hence filed by the Managing
Director of the Bank, before the State Bar Council (Madhya Pradesh) on 3.2.1994.
It was alleged in the complaint that appellant is guilty of professional misconduct
by not returning the files to his client.

In the reply which the appellant submitted before the Bar Council he admitted that
the files were not returned but claimed that he has a right to retain such files by
exercising his right of lien and offered to return the files as soon as payment is made
to him.

HELD:

We, therefore, that the refusal to return the files to the client when he demanded
the same amounted to misconduct under Section 35 of the Act. Hence, the
appellant in the present case is liable to punishment for such misconduct.

However, regarding the quantum of punishment we are disposed to take into

account two broad aspects: (1) this court has not pronounced, so far, on the
question whether advocate has a lien on the files for his fees. (2) the appellant
would have bona fide believed, in the light of decisions of certain High Courts, that
he did have a lien. In such circumstances it is not necessary to inflict a harsh
punishment on the appellant. A reprimand would be sufficient in the interest of
justice on the special facts of this case.

We, therefore, alter the punishment to one of reprimanding the appellant.

However, we make it clear that if any advocate commits this type of professional
misconduct in future he would be liable to such quantum of punishment as the Bar
Council will determine and the lesser punishment imposed now need not be
counted as a precedent.

Appeal is disposed of accordingly.

BAILMENT:
(1) N.R. Srinivasa Iyer vs New India Assurance Co

The appellant's motor car, insured with the respondent

(`insurer') suffered damage in an accident and was taken to
and left in the custody of a repairer. On receipt of
intimation of the accident, the insurer
entered into
correspondence with the repairer, accepted the estimate of
repair charges and advised the repairer to proceed with the
repairs. The. motor car was, however, destroyed in a
fire
which occurred hl the repairer's workshop. The appellant
filed a suit claiming from the insurer the value of
the
motor car on the footing that the insurer was the bailee of
the motor car while it was in the custody of the repairer.
The trial court upheld the contention of the appellant
and decreed the suit but, in appeal, the High Court set
aside the decree and dismissed the suit on a ground not
related to the contention based on the
contract of
bailment. In Civil Appeal No, 142 of 1965 decided on October
31,1967 this Court allowed the appeal of the appellant and
remitted the same to the High Court requesting it to deal
with the following questions: (i) whether the insurer was a
bailee of the motor car; (ii) Whether the insurer failed to
take as much care of the car as a person of ordinary
prudence would in similar circumstances; and (iii) The value
of the destroyed car. 1 he High Court held on the basis of
the correspondence between the parties that the car was
entrusted to the repairer by the appellant's son on behalf
of the appellant, that this was done without reference to
the insurer, that the insurer had only agreed to pay the
repair charges and that therefore the insurer was not
a
bailee of the motor car.
Allowing the appeal,
^
HELD: 1. A bare perusal of some of the
conditions
contained in the contract of insurance would unmistakably
lead to the conclusion that the insurer was a bailee of
the
motor car. The custody of the repairer was that of a
sub-
bailee. The High Court went wrong in not
making any
reference to the contract of insurance between the parties.
In a contract of insurance, there are mutual
rights and
obligations both of the insurer and the insured. If the
motor car is damaged in an accident, a duty is cast on the
insured not to leave the damaged car unattended which of
necessity would oblige the insured either to keep a watchman
or if the car is in a condition to be moved it ought to be
480
taken to a repairer, and the insurer undertakes an
obligation to reimburse the cost of removal to the insured.
This would imply that from the scene of the accident, it is
the duty of the insurer to remove the car to the nearest
repairer but this duty is to be performed by the insured on
behalf of the insurer. Another important condition of the
contract is that, once the car is damaged in an accident,
the insurer may, at its own option, either repair, reinstate
or replace the motor car. When the insurer has the option to
replace the motor car, it can take over the damaged car and
the insured is bound to submit to the same. If the insure,
on the other hand, exercises the option of repairing the
car, it is entitled not merely to choose the repairer
but
also to determine the charges for repairs to be
settled
between the insurer and the repairer and the insured has
hardly anything to do with it.

(2) Morris v. C.W.Martin & Sons Ltd.

[1966] 1 QB 716

(sub-bailment, theft or negligence of the staff)

FACTS:

The plaintiff took her mink stole to a furrior for cleaning. Sine he did not do cleaning,
he subcontracted the fur to defendant on the current trade condition which provided
that goods belonging to customers on the defendant premises were held at
customer’s risk and defendant was liable only for his negligence during the
processing. M, an employee of the D, entrusted with the task, stole the fur.
ISSUE: Whether or not D vicariously liable for the tortuous and criminal act
(conversion) of M?

HELD:

COUNTY COURT

1. D’s liability if any must be in tort.

2. M’s act was outside the course of employment.

3. Cheshire V Bailey (employer, not liable vicariously, if act for the benefit of
servant) is good law and applicable here.

4. D, not negligent in employing M.

COURT OF APPEAL

Issues

1. Whether or not M’s act in the course of employment?

2. Whether or not master, with no fault of his own, liable for theft or
dishonesty of servant?

3. Can P sue D directly for the misappropriation?

4. Can D rely on exempting condition of trade practice?

BANK GUARANTEE:
(1) Ansal Engineering Projects Ltd vs Tehri Hydro
Development CORP
This Special Leave Petition arises from the order of the learned
Single Judge of the Delhi High Court dated January 17, 1996 made
in Suit No. 990/95, The petitioner had sought for injunction under
Section 41 read with Schedule II of the Arbitration Act, 1940 (for
short, the 'Act') to restrain the respondent from invoking the bank
guarantee No. 33/1991 dated February 13, 1991 to encash Rs.
57,57,970 pursuant to the letter of invocation dated April 5, 1995.
The facts mentioned therein are that petitioner had entered into
contract oil March 30, 1991 pursuant to a tender submitted by him
to construct 108 residential quarters at Katharia, Bhagirath
Puram, Tehri. The construction was to be completed within
stipulated period but was not completed. In terms of the contract,
the first respondent had terminated it. The petitioner availed of
the remedy under Section 20 of the Act for appointment of an
arbitrator for reference of the dispute in terms of the contract.
Pending consideration thereof, he filed an application to restrain
the respondent to encash the bank guarantee. The respondent
after termination of the contract had issued a letter of invocation
dated April 5, 1995 calling upon the UCO Bank to pay the aforesaid
amount in terms of the bank guarantee, It was contended in the
High Court that the amount due and payable by the petitioner
should be determined in the suit. The bank guarantee could not be
invoked till then and the payment thereof could not be made. The
respondent had played fraud on the petitioner in entering into the
contract and seeking extension of the time. There are exceptional
circumstances which necessitated the petitioner to seek relief of
injunction pending determination of the amount due and payable
by the petitioner. The High Court rejected the contentions and
dismissed the petition. Thus, this special leave petition.
HELD:
A conjoint reading of the bank guarantee and the letter of
invocation demanding payment of amount due and payable by the
petitioner would show that the first respondent had specified and
quantified in terms of the bank guarantee a total sum with interest
due thereon in a sum of Rs. 57,57,970 as on April 5, 1995. A
demand in terms of clause (i) of the bank guarantee was made, The
bank had irrevocably promised and undertaken to pay to the
Corporation without any demur or damage an amount not
exceeding Rs. 57,57,970 plus interest as per terms and conditions
contained in the bank guarantee untrammelled by the bilateral
agreement between the petitioner and the first respondent-
Corporation stating the amount claimed was due and payable on
account of loss or damage caused to or likely to be caused to or by
the Corporation by reason of any breach by the said contract or
any of the terms and conditions contained in the Said agreement
 notwithstanding any dispute or disputes raised under the con-
tract in any suit of proceedings pending before any court or
tribunal relating thereto. The liability of the bank is absolute and
unequivocal; it would thereby be clear that the bank is not
concerned with the ultimate decision of a court and a tribunal in
its finding after adjudication as to the amount due and payable by
the petitioner to the first respondent. What would be material is
the quantification of the liability in the letter of revocation. The
bank should verify whether the amount claimed is within the
terms of the bank guarantee or letter of credit. It is axiomatic that
any payment by the bank, obviously be subject to the final decision
of the court or the tribunal. At the stage of invocation of bank
guarantee, the need for final adjudication and decision on the
amount due and payable by the petitioner, would run contrary to
the terms of the special contract in which the bank had undertaken
to pay the amount due and payable by the contractor. Thus we
hold that there is no question of making out any prime facie cause
much less strong evidence or special equity or exceptional
circumstances for interference by way of injunction.
(2) Pandit Construction Company vs Delhi
Development Authority
 The petitioner is a registered partnership firm and in pursuance to an
invitation for tender floated by respondent No. 1 for work of construction of
shopping centre at New Rajinder Nagar, a tender bid was submitted. The
tender submitted by the petitioner was accepted in terms of the letter dated
30.11.1990 of respondent No. 1/DDA at a tendered cost of Rs. 1,24,75,860/-
and an agreement was executed between the parties dated 12.12.1990. The
stipulated date of completion was 9.3.1992 (15 months). The work was,
however, completed only in late April, 1998 and the completion certificate
was issued on 28.4.1998. The petitioner blames respondent No. 1/DDA for
the same.
 2. It is the case of the petitioner that in view of the disputes about payment
between the petitioner and respondent No. 1, the petitioner issued a notice
dated 9.7.2001 to the Chief Engineer of respondent No. 1 for appointment of
an arbitrator and in view of the failure to do so, filed a Suit No. AA No.
258/2002 before this Court. Shri C.S. Jawa, District and Sessions Judge
(retd.) was appointed as the sole arbitrator in terms of the order dated
27.8.2003 passed in the said suit.
 3. The sole arbitrator, respondent No. 2, made and published an award dated
27.10.2005. The arbitrator adjudicated upon the claims of the petitioner on
merits but the claims were rejected on the ground of being barred by
limitation as also the plea of estoppel being found in favor of respondent No.
 1. The petitioner has filed the present objections under Section 34 of the
Arbitration and Conciliation Act, 1996.

HELD:
The petitioner would, thus, be entitled to the total sum of Rs. 8,19,734.90 (Rs. Eight
lacs nineteen thousand seven hundred thirty four and paise ninety only) along with
interest @10% P.A. from 27.08.2003, the date of reference to arbitration till the
date of payment. However, the amount, if any, already paid to the petitioner during
the pendency of the arbitration proceedings be adjusted against the principal
amount. The parties are left to bear their own costs.

(3) Union Of India And Ors vs Sugauli Sugar Works (P) Ltd
The non-delivery of the goods booked by the respondent
on September 5, 1955 to several destinations under "Railway
Risk" due to the sinking of "Barge No. 6, carrying the
wagons containing the goods" led to the filing of four suits
which were dismissed by the Trial Court holding that the
accident was not due to the negligence of the Railway
employees. The High Court, accepting the appeal
of the
respondent by its judgment dated April 13, 1966 held that
the sinking of Barge was not due to "inevitable accident"
but due to the serious negligence of the Railway
employees
and their failure of duty to take due care which it was
required to take as a bailee as revealed by their own
Enquiry Committee held with reference to Ss. 83 and 84 of
the Railways Act read with section 2 of the Indian Railways
Board Act (4 of 1905) and rule 18 of the Railway Board
Rules. The High Court remanded the suits for determination
of the quantum of the decretal amount due to the respondent.
The trial court after remand gave decrees in favour of the
respondent on 10th September, 1966 without interest claimed
up to the date of filing of the suit and interest "pendent-
lite". The High Court, on appeal by the respondent by its
judgment dated 3-9-1968 allowed interest "pendent-lite" and
future interest at the rate of 4 1/2% per annum.

HELD: (1) The liability of the Railway was that of a

bailee. The consignments were booked at Railway risk. The
onus of proving that the Railway employees took the
necessary amount of care and they were not guilty of
negligence rested on the Railway Authorities. The question
of onus is not important when the entire evidence is
before
the court. In the instant case there was no legal evidence
to prove "inevitable accident" but suppression of important
documents and non production of important witnesses in
charge of the Barge. The Barge sank because of the serious
and gross negligence of the railway employees
and the
railways did not take due care which it was required to take
as a bailee. [617B-D; 618F-G]
(II) The Enquiry Committee, in the instant case, is a
Joint Enquiry, under the rules and the report is admissible
under Ss. 5, 7 and 9 of the Evidence Act. The claim for
privilege is not admissible because no such claim was made
before the Courts below and there was no affidavit of the
Minister incharge or the Secretary of the Department
to
support a claim for privilege. [616G-H]
(III) One of the principles for award of damages
is
that so far as possible he who has proved a
breach of a
bargain to supply what he has contracted to get
is to be
placed as far as money can do it, in as good a situation as
if the contract had been performed. The fundamental basis
thus is compensation for the pecuniary loss which
naturally
flows from the breach

SALE OF GOODS:
Priest v Last (1903).
This case is demonstrates the principle if the buyer told the seller the
particular purpose which he/she is purchasing the goods, then it is an
implied condition that the goods are reasonable to for the purpose. From
this case, the buyer who bought a hot-water bottle from the seller was a
chemist. His wife uses the hot-water bottle and then after 5 times, the
bottle burst and the wife was scalded. Evidence shows that, the bottle
was not fit for use as a hot-water bottle. The buyer claimed for breach
of section 14(3). The seller stated that, the buyer had not made known
the purpose for the hot-water bottle would be used. However, this was
rejected by the court. The court held that, the seller has entitled to
recover the expenses in the treatment of the buyer’s wife injuries. It
is because the buyer relied on the seller’s judgment and he had in fact
used the hot-water bottle for the usual purpose.

Grant v Australian Knitting Mills

Australia-Sale of Goods-Woollen Underwear-Defective Condition-
Chemical Irritant-Latent Defect-Dermatitis contracted-Breach of Implied
Condition-Retailer liable in Contract -Negligence in Manufacture-
Liability in tort-South Australia Sale of Goods Act, 1895 (58 & 59 Vict. No.
630), s. 14, sub-ss. 1, 2.

The appellant, who contracted dermatitis of an external origin as the

result of wearing a woollen garment which, when purchased from the
retailers, was in a defective condition owing to the presence of excess
sulphites which, it was found, had been negligently left in it in the process
of manufacture, claimed damages against both retailers and
manufacturers:-

Held, first, that the retailers were liable in contract for breach of implied
warranty or condition under exceptions (i.) and (ii.) of s. 14 of the South
Australia Sale of Goods Act, 1895 (identical with s. 14 of the English Sale
of Goods Act, 1893).