Bank’s liability for contract frauds and wrong of its agents or servant in India toward third parties,
- Any contract done on its behalf toward third parties.
- Agent or servant committed fraud, misrepresentation or tort on behalf of Bank’s.
Principal- agent relationship, Indian Contract act effect of agency on contract with third person
Principal- agent relationship :- For the contract enters by agent, the principal becomes bound toward third person. Means the act done by agent on behalf of Bank’s, is as the act done by Bank’s and all the liability of its of Bank’s.
Enforcement and consequences of agents contracts banks liabilities
Section 226 of the indian contract act 1872 Enforcement and consequences of agents contracts,
- Obligation arises
- Same legal consequences if done by principal in person.
Contract entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner.
And will have the same legal consequences, as if the contracts had been entered into the acts done by the principal in person.
Who liable when agent does more than he authorised?
Section 227 of the contract act 1872 illustration, A being owner of a ship and cargo authorizes B to procure an insurance for ₹4000 on the ship.
B procures a policy for ₹4000 on the ship and another for the like sum on the cargo.
A is bound to pay the premium for the policy on the ship, but not the premium for policy on the cargo.
As per the illustration, agent, what he does as within his authority is only binding as between him and his principal.
Consequences of notice given to agent liabilities of principal
Section 229 of contract act illustration, A is employed by B to buy from C certain goods, of which C is the apparent owner, and by them accordingly.
In the course of the treaty for the sale, A learns that the goods really belonged to D, B is ignorant of the fact.
B is not entitled to set-off a debt owing to him from against the price of the goods.
Section 229 Any notice given to or information obtained by the agent, provide it be given or obtain in course of the business.
Transact by him for the principal, shall as between principal and 3rd parties, have the same legal consequences as if it had been given to or obtained by principal.
Person falsely contracting as agent, not entitled to perform
According to section 236 of contract act, A person with whom a contract has been entered into in the character of agent.
Is not entitled to require the performance of it, if he was in reality acting, not as agent, but on his own account.
What are Effect, on agreement, of misrepresentation or fraud by agent?
“Qui facit per alium facit per se”
Means that the act of agent is the act of the principal.
Case:- Govt of Goa vs Goa Urban Cooperative Bank Ltd it was held that the principal cannot escape the liability for the negligence of agent.
Case:- Loyed vs Grace smith & co 1912 AC 716, A principal is liable for the fraud of the agent within the scope of his authority. Whether the fraud is committed for the benefit of the price principal or benefit of agent.
Illustration of section 238 of indian contract act, effect, on agreement, of misrepresentation, or fraud by agent.
A, being B’s agent for the sale of goods includes C to buy them by a misrepresentation, which he was not authorized by B to make. The contract is voidable, as between B and C, at the option of C.
A, the captain of B’s ship, signs bills of lading without having received on board the goods mentioned therein. The bills of lading are void as between B and the pretended consignor.
What is Void and voidable ? Bank’s liability for contract frauds
Void defined in section 2(g) of indian contract act 1872, An agreement not enforceable by law is said to be void.
Voidable contract section 2(i) An agreement which is enforceable by law at option of one or more of the parties thereto, But not at the option of the other or others.
Misrepresentation contract act, Bank’s liability for contract frauds
Section 18 of the indian contract act 1872, define Misrepresentation.
Case:- mohan lal vs Gangaji Cotton Mill 1930, statement given without reasonable cause and believing to be true, though they are not true for there is no reasonable ground of such belief are misrepresentation.
What is set-off indian contract act? Bank’s liability for contract frauds
When two parties have mutual, ascertained money claims that are legally recoverable and due. Order VIII Rule 6 of the Civil Procedure Code (CPC), where it acts as a statutory defense in a money suit.