Legal Question in Credit and Debt Law in India

P had authorized his agent A to sell his goods, even on credit. Accordingly, A had sold some of P�s goods to C on credit, but he had done so without making the necessary trade enquiries regarding C�s financial position and credibility. C had subsequently failed to make the payment for credit purchases. It was later found that C was already declared insolvent at the time of credit sale. In this case the principal P, or the agent A is liable under the given case?


Asked on 5/21/16, 10:11 pm

2 Answers from Attorneys

1) Section 212 lays down the standard of care and skill required by an agent.

2) There are certain duties of agents such as execution of instructions, exercise of skill and care, act in good faith etc.

3) The principal�s many remedies for an agent�s breach of her fiduciary duty include termination of the agency and recovery of damages from the agent.

4) Since the buyer already declared adjudged insolvent, a fact must hv well known in the trade circles, the Agent failed to make minimum reasonable enquiries before allowing credit purchases. Hence A has to compensate the

loss to his principal P.

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Answered on 5/21/16, 10:38 pm
Fca Prashant Chavan Expert Edge LLP

22.05.2016

Dear Sir / Madam,

The principal P remains liable for the loss as the agent A is only acting on behalf of the principal.

Regards,

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Answered on 5/22/16, 2:56 am


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