Module 2

SPECIAL CONTRACTS
Indemnity and Guarantee
CONTRACT OF INDEMINITY
Definition
Accor. Sec 124 of contract act “ a contract of indemnity
is a contract by which one party promises to save the
other from loss caused to him by the conduct of the
promisor himself or by the conduct of any other
person”.
The person who promises to save the other from the
loss is called indemnifier. The person for whom the
promise is made is called indemnified or indemnity
holder.
 Contract of indemnity can be of two types

1. Express contract of indemnity

2. Implied contract of indemnity

[Link] contract of indemnity

Where the terms of the contract of indemnity are
either written or oral form is called an express
contract.
2. Implied contract of indemnity
contract of indemnity can be inferred from the
circumstances of the case or from the relationship of
the parties.
CONTRACT OF GAURANTEE OR SURETYSHIP
Contract of Guarantee is a contract to perform the
promise or to discharge the liability of a third person
in case of his default.
Eg: A lends rs500 to B on C’s promise to pay the same if
B fails to pay within a year. This is a contract of
guarantee. Here C is the surety, B is the principal
debtor and A is the creditor.
 Essential features of a contract of guarantee
1. Three parties
There must be three parties in a contract of guarantee
namely, principal debtor, the creditor and the
surety.
2. Identity of mind
Contract of guarantee requires the identity of mind of
all the said three persons in respect of the subject
matter of the contract.
3. Liability in existence
Liability must exist in contract of guarantee apart from
the surety and that liability should be enforceable
by law.
4. Primary and secondary liability
Primary liability is for principal debtor and secondary
liability for surety.
5. Writing or oral
Contract of guarantee may be oral or written.
6. Essential elements for a contract
Contract of guarantee must have all the essential
elements of a valid contract.
7. No misrepresentation or concealment.
Any guarantee which is obtained by the parties in the
contract through misrepresentation or concealing
some facts it is considered as invalid or void
transaction.
Consideration & capacity to contract in a contract of guarantee

contract of guarantee should also be supported by

some consideration, but may not be direct between
surety and creditor.
The persons in the contract of guarantee must be
competent to contracts.
Contract of guarantee is not a contract of ‘Uberimae
Fidei’. ("utmost good faith“)
It means a condition practiced in insurance companies
where the policyholder act in good faith by fully
disclosing all information that affects the insurance
company's level of risk.
Fraud on the part of the principal debtor is not enough
to set aside the contract, unless the surety is able to
prove that creditor also knew about the fraud.
Difference between contract of Indemnity & Guarantee
• Contract of Indemnity consist of only two parties-
indemnifier and indemnified. While contract of
guarantee there are three parties; Principal debtor,
surety and creditor.
• There are only one contract between the two parties
in contract of indemnity. Contract of guarantee are of
three contracts.
• The liability of the indemnifier is primary and
independent, but for the surety is collateral and
secondary.
• Indemnifier need not act at the request of
indemnified. Surety acts at the request of principal
debtor.
• The liability of the indemnifier is contingent but
surety is subsisting.
• Indemnifier cannot sue third parties in his name. the
surety can sue the principal debtor in his own right.
• Contract of indemnity is for reimbursement of loss,
contract of guarantee provides surety to the creditor.
• Contract of indemnity and guarantee can be written
or oral. But in English law, contract of guarantee
must be in writing.
 Kinds of guarantee
1. A guarantee may be absolute or conditional
In absolute guarantee, guaranteer unconditionally
promises payment or performance of the contract
on default of debtor.
Conditional guarantee is one which is not immediately
enforced on default but by any contingency.
2. A guarantee may be retrospective or prospective:
when a guarantee is given for an existing debt it is
called retrospective guarantee. When guarantee is
given for future debt it is prospective guarantee.
3. A guarantee may be general or specific
A general guarantee is one for acceptance by the public
generally. Specific guarantee is given for a particular
transaction or debt.
4. A guarantee may be limited or unlimited.
Limited guarantee is one which is restricted to a single
transaction. Unlimited guarantee is one which is
unlimited to time or amount.
 Continuing Guarantee
According to sec 129 of Contract Act “ A guarantee
which extends to a series of transactions called a
continuing guarantee”.
It communicates only about continuing the guarantee
for transactions not the time period of that
transactions.
Eg: ICICI is making a contract with a fund collecting
agency called ‘Matrix’ for collecting the loan
installments in specific region. Matrix is giving the
contract to another agency called ‘Solutions’. And
matrix guarantees ICICI for any defaults from
solutions in the payment collection during contract
period. This is a continuing guarantee.
 Revocation of continuing guarantee
1. By notice of revocation by the surety.
The surety has an option to terminate the contract by
giving a due notice to the creditor in respect of any
future transactions.
2. By death of surety
Death of surety revokes a continuing guarantee as
regard to future transactions.
3. By Novation
Substitution of a new contract in place of an old
contract.
4. By altering the terms of a contract
If any alteration in the contract is made by creditor and
debtor then surety is revoked from performance of
contract.
5. By release of principal debtor
If principal debtor is released by the creditor, surety is
revoked from any act or promise.
6. By creditors act of omission.
Any act or omission of the creditor which results in
eventual remedy of the surety against the debtor
amounts to revocation of the contract of guarantee.
 Rights of Surety

Rights of surety against creditor, debtor and co-sureties

1. Rights against creditor
a) Before payment of the debt.
The surety can sue the debtor through the creditor
before making the guaranteed payment which is on
due. But surety has to indemnify the expenses or
loses for the suit.
b) On payment of debt:
After making the payment of the debt by the surety, he
can ask the creditor to assign to him all the
securities taken by him at the time of contract of
guarantee.
c) Right to be set off
• When the surety is sued by creditor for being called
upon to pay, can claim any set-off to which the
principal debtor is entitled from the creditor.
2. Right against principal debtor.
a) right to be relieved from liability
When the payment is due from the side of surety, he
can compel debtor to make the payment and
release him from the liability. For this purpose the
surety can take some proceedings also.
b) Right of subrogation
When the surety pays off the debt on due, surety gets
into the position of creditor against debtor with all
the privileges of creditor.
c) Right to indemnity
In contract of guarantee the surety has the right to
obtain back the payments made by him on default of
the principal debtor.
3. Right against co-sureties
When a debt is guaranteed by two or more sureties,
they are called co-sureties. Co-sureties are liable to
contribute to the debt as agreed, but if one person
makes the complete payment, he can claim it from
other co-sureties.
a) co-sureties liable to contribute equally.
b) If the Liability of co-sureties are agreed in different
sums, then they have to contribute accordingly.
c) Release of any one of co-surety by creditor does not
release others.
 Nature and extend of surety’s liability

1. Liability of the surety is secondary

2. The liability of the surety is co-extensive with that
of the principal debtor.
3. Commencement of surety’s liability.
4. Surety is not liable until the creditor has performed
his part of the promise.
5. Surety is liable only for the unpaid balance.
6. Surety is not liable for fruitless litigation that the
creditor may bring against the debtor.
7. Surety is not liable for any judgments obtained
against the principal debtor. Liability is only on debt.
 Discharge of surety’s liability
1. Revocation of the contract of guarantee
a) Revocation of giving notice
Surety can revoke a continuing guarantee by giving
notice to the creditor.
b) Revocation by death
c) Revocation by novation.
2. Discharge of surety by the conduct of creditor
a) Variations in terms of contract:
If any change is made without the consent of the surety
contract, he will be discharged from performance.
b) By release of principal debtor
If the debtor is released from contract then the surety
is also released.
c) Composition with debtor
If the creditor is making any contract with debtor for
not suing him without the consent of the surety, in
such cases the surety is discharged from
performance.
d) Creditor’s acts or omission impairing surety’s remedy
If the creditor does anything which is against the rights
of the surety or omits to do anything then the surety
is discharged from performance.
e) Loss of securities
If the creditor loses or uses the security belonging to
the debtor, then the surety is discharged to the
extend of value of security.
3. Discharge of surety by invalidation of contract
a) Guarantee obtained by misrepresentation and
concealment
If the guarantee by creditor is obtained on concealment
or misrepresentation of the facts then the surety is
discharged from performance.
b) Failure of consideration
If there is no consideration in contract, surety is
discharged from performance.
c)Lack of any essential elements of a contract:
If any of the essential elements in a contract is absent
then that contract of guarantee is not valid. Surety is
also discharged.
d)Condition regarding the joining of co-surety
If a condition is added in the contract saying a co surety
should also join for creditors performance and if that
condition fails then the contract is void and surety is
discharged from performance.
 CHAPTER 2
BAILMENT AND PLEDGE
The word Bailment is derived from the French word
“Baillior” which means to deliver.
It is the voluntary change of possession of goods from
one person to another for some purpose. Here the
ownership of the goods is with one person and the
possession is with another person.
Eg: a person who gave some gold to a goldsmith to
manufacture some jewelry. So there is only a
relationship of bailment between the parties.
Definition bailment
Sec 148 defines “ a bailment is the delivery of goods by
one person to another for some purpose, upon a
contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of
according to the person delivering them”.
Delivery is not accompanied by transfer of ownership.
The person who delivered the goods is called bailor.
The person to whom they are delivered is called the
bailee. The transaction is called bailment.
Characteristics of a Bailment
1. There must be a delivery of goods
2. Actual or constructive delivery
When the goods are physically handed over to the
bailee it is actual delivery.
When the goods are not physically handed over due to
its impossibility the transfer may be done
symbolically, it is called as constructive delivery or
symbolic delivery.
3. Delivery should be for some purpose upon a contract
Delivery of goods should have a legal purpose based on
which the goods is transferred.
4. Return of goods
The goods which are transferred to the bailee should
be returned to the bailor in the same manner or in
an altered form if specified.
5. Ownership is not transferred
Classification of bailment
a) Gratuitous bailment b) non gratuitous bailment.
Gratuitous bailment:
When the goods are transferred from bailor without
any reward for bailee.
Non gratuitous bailment
Where the bailee gets remuneration for possessing the
goods.
c) Bailment may voluntary and involuntary
Voluntary bailment means transfer happens by
expression of parties in contract.
Involuntary means transfer happens by operation of
law. Eg: govt possess the assets of a minor without
legal heirs.
d) Bailment for exclusive benefit or Mutual benefit
The bailment can be for exclusive benefit of bailor or
bailee. It can be contracted for mutual benefit also.
Duties of a Bailee
1. To take reasonable care of the goods bailed.
2. Not to mix the goods bailed with his own goods.
3. Not to make any unauthorized use.
4. Not to set up adverse title
5. To return the goods
6. Retain additions or profit.
In absence of contract for retaining the profit, the
bailee will have to return the additions and profit.
Rights of the Bailee
1. Right to enforce the duties of the bailor
Bailee by suit can enforce the bailor to perform his
duties.
2. Right to reimbursement
If bailee face any loss by possessing some goods which
had faults and the fact was kept hidden by bailor,
that loss should be reimbursed.
3. Right to remuneration for services provided.
4. Right to compensation
The bailee can claim the loss if the bailor defaults to
take back the goods which was bailed.
5. Right of lien unless there be a contract to the
contrary.
The bailee if renders some services or work for the
possessed goods he has the right to receive
remuneration of his services.
6. Right to deliver goods to one of the joint owners
If goods are transferred by joint owners of the goods,
the bailee shall return the goods to any one of the
joint owners.
7. No liability to the true owners if bailee acts as per
directions of bailor.
If any bailee who is not the original owner, accepts the
goods in good faith and returns back to him, the
bailee is not responsible to the original owner.
8. Right to sue
The bailee has the right to file a suit against the
person who has wrongfully deprived him of
the use or possession of the goods or it has
some injury from beginning.
Duties of a Bailor
1. Duty to disclose known defects:
A gratuitous bailor is bound to disclose to the bailee all
those defects of which he is aware and which
expose the bailee to extraordinary risks. In such
case the bailor is responsible for damages arising to
the bailee from such defects.
2. Duty to bear extraordinary expenses of bailment
If it’s a gratuitous bailment the bailee receives no
remuneration but bailor has to pay all the necessary
expenses incurring for the bailee.
3. Duty to indemnify bailee
A bailor is responsible to the bailee for any loss due to
his imperfect title in the goods bailed.
4. Duty to receive back the goods
It is the duty of bailor to take back the goods when the
purpose is fulfilled. If the bailor refuses to take back
the goods he is liable to give compensation for
maintaining the goods.
5. Duty to bear normal risks
It is the duty of the bailor to bear normal risk of goods
bailed, when the bailee has taken reasonable care.
Rights of the Bailor
1. Entitled to get back the goods.
2. Entitled to claim any increase in value or profits.
3. Right of termination
A contract of bailment can be stopped by bailor if he
finds that bailee does not act properly according to
the conditions of bailment.
4. Right to recall goods at any time in a gratuitous
bailment.
5. To enforce the duties of bailee
6. Right to file a suit against third person.
If a third party do any wrongful acts on goods bailed or
bailee, bailor can sue the third person and get
compensation.
LIEN
Lien means a right by which a person is entitled to
retain the possession of goods of another until the
sum due to him is paid. Its also called “Possessory
lien”.
Types of lien
a) Particular lien b) General Lien
b) Particular lien
A particular lien is a right of the bailee to retain the
goods in his custody until he receives due
remuneration for the services rendered in respect
of goods possessed by them.
b) General Lien
General lien is a right to retain the goods of another as
a security for a general balance of account.
Some of the persons entitled for general lien are
bankers, factors, wharfingers, attorneys of a high
court, policy brokers.
Difference between particular lien and General Lien

particular Lien General Lien

Against the goods which Against any property in
bailee has rendered possession
service.
it can be exercised only for can be exercised for the
the due amount. general balance amount.

Exercised by all bailee’s Exercised by bankers,

factors, wharfingers etc.
FINDER OF LOST GOODS
When a person finds some goods belonging to another
and takes them in his custody, law imposes a
contract of bailment between the finder of goods
and the true owner of goods.
Finder of goods means an innocent finder. Following
are the rights of finder of lost goods.
1. Right of lien
He can hold back the goods for receiving compensation
for the expenses incurred in finding out the goods
or preserving the goods. But he cannot sue for the
same.
2. Right to sue for reward
If the owner of the lost goods has declared a reward for
finding it and returning it, the finder can sue the
person for attaining the reward.
3. Right to sell
The finder can sell the goods on following conditions
a) Finder could not find the original owner with
reasonable diligence.
b) When the goods are in danger of perishability.
c) Lawful charges of the finder in respect of the goods
found, amount to two third of its value.
 TERMINATION OF BAILMENT
Contract of bailment will be terminated in the
following circumstances.
1. When the object is achieved.
2. When the time is fixed expires
3. When the goods bailed are used against the terms
of the contract.
4. When the subject matter is destroyed
5. When the bailor or bailee dies.
Pledge Or Pawn
Every contract by which the possession of goods is
transferred as security is deemed to be pledge.
The words pledge and pawn are synonymous. The
bailor is known as pledgor or pawnor. The bailee is
known as pledgee or pawnee.
Rights of the pawnee
1. Rights of retainer: pledgee retains the goods
pledged until his dues are paid.
2. Rights of retainer for subsequent advances: pledgee
can retain the goods for subsequent advances aslo.
3. Right to extraordinary expenses: pledgee can
recover from pledgor the extraordinary expenses
incurred for preservation of goods.
4. Right against true owner, when the pawner’s title is
defective.
5. Pawnee rights where pawner makes default
• He can file a suit against the pawner for the debt.
• He can retain the goods pledged as a collateral
security.
• He may sue for the sale of goods and the realization
of money due.
• He can sell the goods pledged after giving the
pawnor a reasonable notice for the sale.
• He can recover any deficiency arising on the sale of
goods and surplus can be returned.
Rights and duties of the Pawnor
1. If pawner defaults in payment on pledge within
time, he can yet pay it before actual sale.
2. On such cases of sales all the expenses should be
met by pawnor.
3. Any increase in the goods pledged belong to the
pawnor.
Bailment and Pledge difference
1. In pledge the bailment is done as security for the
money paid. But ordinary bailment contracts are
not that.
2. Gratuitous bailment the bailee is bound to return
the goods on demand, but in contract of pledge it is
not bound to be returned.
3. In both the possession of goods is only transferred
but not ownership. But on default the bailee can
retain it but not sell it. In pledge the pawnee can
sell it on notice.
4. In both contracts the goods are to be returned on
fullfilment of purpose.
Pledge by Non owner
Situations where non owner can make pledge.
1. A mercantile agent with the consent of the owner in
possession of goods.
2. A person having the possession of goods under a
voidable contract as long as the contract is not
rescinded.
3. Pledge where pawnor has only a limited interest.
Pledge is valid only to the extend of his interest. If
pawnee makes value addition it is not accountable
by pawnor.
4. When co-owners exist, one of the co-owner can sell
it with others consent.
5. After sale of the goods a seller is still possessing the
goods can make a valid pledge, provided pawnee
agrees to it.
 CHAPTER 3. THE LAW OF AGENCY
In Business some situations demand to depend on
other person to make business transactions.
AGENT
An Agent is a person employed to do any act for
another or to represent another in dealings with
third parties.
PRINCIPAL
The person for whom such act is done, or who is so
represented is called the Principal.
Rules of Agency
1. Whatever a person can do personally, he can do
through an agent.
2. Acts of an agent are acts of the Principal.
Essentials of agency
1. The principal should be competent to contract.
2. Any person may become an agent
3. No consideration is necessary to create an agency.
 Distinction between Agent and Servant

1. An agent is employed for the purpose of creating

contracts. But servant works under the supervision
of his master.
2. The principal directs what works the agent has to
do, not the method of work. But for servant both
has to be communicated.
3. An agent has the discretion of doing the work. But
servant is in complete control of the master.
4. Agent receives commission but servant receives
wages or salary.
5. Agent may have several principals but a servant will
be guided by only one master.
 Creation of an Agency
1. Agency by Express agreement:
When agent is appointed by words spoken or written it
is called agency by express agreement.
2. Agency by Implication
Agency which is created by implication of law like
landlord and tenant.
3. Agency of Estoppel
Estoppel means to prevent a person from denying a
fact.
4. Agency by holding out
Its an extension of Estoppel principle. Where the
principal permits another person by a long course
for pledge, he will responsible for all situations of
pledge.
5. Agency by necessity
Based on some extraordinary situations one person
may act as an agent for another without any express
or implied contracts.
6. Agency by ratification
Sometimes the agent may act without the authority of
the principal. If the principal ratifies it then the act of
the agent is known as agency by ratification or
expost facto agency.
 TERMINATION OF AGENCY
Termination of Agency by two methods;
1. By act of parties
2. By operation of law
[Link] act of parties
Termination of contract either by Principal or by Agent
in following ways;
a) By agreement
The contract can be terminated at any time based on
mutual agreement of the parties.
b) By revocation by the principal.
Principal has power to revoke the authority of agent
whenever he likes.
c) By renunciation of agency
The power of the agent to terminate the agency is co-
extensive with the right of the principal to revoke the
authority. But if agent revokes it before the fixed
period then he has to compensate the principal for
loss.
2. By Operation of Law
a) On completion of the business of the agency.
b) By expiry of time
When the agency is fixed for a time period, expiry of
the time period terminates the law of agency.
c) By the destruction of the subject matter of the
agency.
d) Insolvency of the principal
If principal is insolvent the agency terminates.
e) Death or insanity of the principal or agent.
f) Dissolution of the company
g) The principal becoming an alien enemy.
h) Termination of the sub agents authority
If the agents authority comes to an end, in effect sub
agents authority also gets terminated.
Irrevocable agency
1. When the agency is coupled with interest.
When the agent has a personal interest in the subject
matter of the agency.
2. When the agent has incurred liability
When the agent has incurred liability on behalf of the
principal, the agency contract becomes irrevocable.
3. When the agent has partly expressed his authority.
 Different Kinds of Agents

1. General agents
2. Special agents
3. Universal agents
4. Commercial agents
5. Non commercial agents
1. General agents
Agent who has complete authority to act in all matters
concerning a trade or profession. Eg: MD of a firm.
2. Special agents
They are appointed for a particular purpose, their
authority is limited to that purpose.
3. Universal agents
An agent whose authority is unlimited and he can do
anything for his principal. Usually universal agents
are appointed by a power of attorney.
4. Commercial / Mercantile agents
A person having authority either to sell goods or to
consign goods or to raise money on the security of
goods. They are of several kinds;
a) Auctioneers: a person authorised to sell goods of
his principal by auction.
b) Broker: a person appointed for negotiating and
make contracts either to sell or to buy goods.
c) Factors: A commercial agent employed by a
principal to sell merchandise consigned to him for
that purpose, for and in behalf of the principal, but
usually in his own name, being entrusted with
the possession and control of the goods, and being
remunerated by a commission, commonly called
“factorage.”
d) del credere agency: is a type of principal-agent
relationship wherein the agent acts not only as a
salesperson or broker for the principal, but also as
a guarantor of credit extended to the buyer. If the
buyer is unable to pay the bill after the transaction is
completed, a del credere agent may become liable
for the amount that was unable to be collected.
e) Banker: relationship between banker and customer
is similar to agent and principal.
f) Commission agents: Commission agents also known
as commercial agents-work as middlemen between
vendors and buyers for a commission.
5. Non mercantile agents
They include advocates, attorneys, insurance agent,
wife, etc. who are engaged to look after the legal
affairs of their principal.
SUB AGENT
Sec 191 “a person employed by and acting under the
control of the original agent in the business of the
agency”.
Sub agents are appointed only when the agent have
authority to do so. Sub agent act under the control of
the original agent. There is no direct contract with
principal and sub agent.
When the sub agent is appointed properly
• The principal is liable to third parties for the acts of
sub agent.
• The agent is responsible to the principal for the acts
of sub agent.
• The sub agent is not responsible to the principal
except fraud or willful wrongs.
When the sub agent is not appointed properly
• Principal is not represented by such sub agent and
hence he is not answerable.
• The agent is responsible to the principal as well as o
the third parties.
• Sub agent answerable to agent only.
Substituted agent / Co agent
Substituted agent is appointed by the agent to act for
the principal, with the knowledge and consent of the
principal.
Eg: A tell his agent B to find out an broker to sell his
house. B finds C as the broker and introduces to A. so
C is substituted agent for A.
Once substituted agent is appointed then the actual
agent moves from the contract and substituted agent
creates a direct relationship with principal.
Difference between sub agent and substituted agent
1. A sub agent does his work under the control of the
agent but a substituted agent work according to the
instructions of the principal.
2. Agent appoints the sub agent and delegates some
his duties. Agent does not delegate any duties to
substituted agent.
3. Privity of contract (contractual relationship) is
established between principal and substituted
agent but not with principal and sub agent.
4. Sub agent responsible to agent only. Substituted
agent is responsible to principal.
5. Agent is responsible for the acts of sub agent and
not substituted agent.
6. Agent duty ends by appointing a substituted agent
but his responsibility continues in the case of a sub
agent.
RIGHTS OF AN AGENT
1. Right to remuneration
2. Right of retainer and Lien
3. Right to be indemnified against consequences of
lawful acts.
4. Right to be indemnified against consequences of
acts done in good faith.
5. Right of compensation
Duties of an agent to principal
1. Duty to follow the instructions given by principal
2. Duty of reasonable care and skill
3. Duty to render accounts
4. Duty to communicate in case of difficulty
5. Duty to pay money received on behalf of principal
6. Do not set up adverse title.
7. Duty to pass on information to principal
8. Duty not to delegate his authority.
9. Duty not to disclose confidential information
10. Duty to protect the interest of principal
11. Duty not to make any secret profit from agency.
Rights of Principal
• Right to get proper accounts from agent
• Right to get profit
• Right to communicate to agent
• He may expect that the agent use all his skills for
business.
• Right to give directions for conduct of business.
• He has the right to get all amount received by agent on
his behalf in business after paying off the agents
remuneration.
• The principal has the right to stop the agency contracts.
• Right to get compensation for breach by agent
• Right to recover all secret profits made by agent.
Duties of Principal
• The principal has to indemnify the agent against the
consequences of all lawful acts done.
• Principal must give compensation to agent for the
injury caused.
• Principal has to indemnify the third party if loss
occurred even after the act was done in good faith by
the agent.
• Principal must pay to the agent the commission or
other remuneration.
Liabilities of Principal to third parties
Liability of principal to third parties by the acts of
agent.
1. All acts of agent will bind the principal.
2. For all Misrepresentation or fraud of the agent
within his authority, the principal is responsible to
third parties.
3. Knowledge of the agent is the knowledge of the
principal.
4. If the agent is not disclosing the name of the
Principal, third parties have the right to know the
principal and proceed against him if there is any
dispute.
5. When the agent is personally liable for transactions, a third
person dealing with him may hold either him or the principal.

LIABILITIES OF AGENT TO THIRD PARTIES

1. When the agent is personally liable to contracts.
2. Where the agent is acting for Principal abroad, the agent is
responsible, not the principal.
3. When the agent acts for a undisclosed principal
4. When the principal cannot be sued, like foreign sovereign the
agent will be responsible.
5. When money received by fraud or mistake, the agent alone can
be sued.
6. Agent liable for acts done without authority.
7. If the agent has personal interest in the contract.
8. If the clause of the contract permits agent to be responsible.
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