SPECIAL CONTRACTS

Que 1: What is meant by contract of indemnity and contract of Guarantee? What are the differences between the two? Contract of Indemnity: Contract of indemnity is a contract where one party promises the other party to save or to make good of any loss occurring to the other party, either caused by the promisor himself or any other person.. A contract of indemnity is also a type of contingent contract. e.g. A contract of insurance is a contract of indemnity. The person who gives such a promise to compensate loss is known as Indemnifier and the person to whom such a promise is given is known as Indemnified or Indemnity holder. The insured is known as the indemnity holder and the insurance policy ix known as Indemnity contract. Contract of Guarantee: A contract of guarantee is where a person takes the liability of performing a promise or discharge the liability on behalf of the other towards third party in case the other party defaults. E.g. X takes goods of Rs.500/- from Y. Z gives promise to Y that if X does not pay money, he will pay it. This is known as contract of guarantee or surety. In this way, there are three parties in a contract of guarantee. The person to whom such a promise is given is known as the creditor. The person on whose behalf, the promise is given, is known as Principal Debtor and the person who makes such a promise, is known ass Surety or Guarantor. E.g. Ankit borrows a loan from U.T.I.Bank. Amit promises to the Bank to pay money if Ankit does not return the borrowed money. In this contract, U.T.I.Bank Ankit Amit 1. Defination: A contract by which one party promises to save the other from any loss caused to the other by the promisor himself or any other person is called the contract of Indemnity. On the other hand a contract of gurantee is a contract to perform promise or discharge the liability of the third party in case of his default. : Creditor. : Principal Debtor. : Surety or Guarantor or Secondary Debtor.

Difference between Indemnity and Guarantee :

2. No. of parties: In contract of Indemnity there re two parties. The Indemnifier and the Indemnified or Indemnity holder. There are three parties in contract of Gurantee. The Creditor, the principal debtor and the gurantor or surety. 3. No. of Contracts: There is only one contract in Indemnity. While there are three contracts in contract of Gurantee viz.,contract between debtor and creditor, Debtor and surety and Creditor and surety. 4. Nature of Liability: The liability of the indemnifier is primary in nature because if any loss is caused he will be liable for that. But the liability of the surety is secondary. In this case the primary liability is of the Principal Debtor. 5. Actual Liability : The liability of the Indemnifier arises only in case of the happening of loss or contingency. While there is existing liability on the surety as performance is guaranteed. 6. Claims : The Indemnifier cannot sue any third party for loss. After performing the liability or discharging the debt the surety can claim the amount from the debtor as then he acquires the position of a creditor. Que 2: What is Bailment? How does it differ form Pledge? Bailment Bailment is an agreement under which the possession of goods is transferred from one party to another, only for some specific purpose. When the said purpose is over the goods re either to be returned back or disposed off according to the desire of the giver of goods. Transfer of possession is the basic condition of the contract of Bailment. Possession has to be given actually or physically. The contract of Bailment is applicable to the moveable property and chattels only. (Chattels means small properties e.g. dog, cycle clothes etc.)

There are certain common examples of Bailment like putting a cycle on the cycle stand or giving cloth for stiching to the tailor etc. There are the examples of Bailment. The person who gives the goods on bailment is known as Bailor and the person to whom it is given is known as Bailee. E.g. Prince gives his book Kumar who is a friend of his to be used for exams and to be returned after the exam. Here Prince is bailor and Kumar is bailee. In all such examples, common element or common factor is the delivery or the possession for a particular purpose and for definite time. The goods are to be returned on completion of the purpose. When the purpose or time is over, the goods are to be returned to the bailor. The peculiarities of the contract of Bailment are (1) delivery of possession, and (2) that the goods may be returned or disposed off when the purpose is over. Pledge Pledge is a special form of Bailment. It is the bailment of goods as security for payment of debt or performance of a promise. Here the person who pledges the goods is known as Pawnor and the person who accept goods or the pledge is known as Pawnee. Here Pawnee just accepts goods as security. He does not have any other right on the goods. He can not use the goods personally or change the form of goods. He is under an obligation to return the goods as soon as pawnor returns the loan or performs his promise. Distinction between Bailment and pledge: Bailment 1. Here, one party surrenders goods to another party for specified period or and purpose. Pledge 1. Here, goods are surrendered as a security for the loan taken or for performance of a promise. It is a mortgage. The goods are to be actually mortgaged or delivered.

2. Here the goods are to be returned 2. Here, the goods are to be returned only when Pawnor returns money to after the time period is over or purpose is the Pawnee. over. 3. Here, the goods are to be returned in 3. Here, the goods may be returned in a the same form. changed form also according to the instructions of the bailor. 4. The pawnee can sell goods after 4. The bailee can not sell the goods. giving a due notice to the pawnor.

Thus pledge is a kind of Bailment made only for specific purpose i.e. as a security for payment of debt, or for a promise. Both the agreements result in the transfer of the property. QUE 4: What are rights of Bailor and Bailee? The person who delivers the goods is called Bailor and person to whom the goods delivered is known as Bailee. DUTIES OF BAILEE(RIGHTS OF BAILOR):(1) Duty to take care: It is the duty of the bailee to take care of the goods, as if the goods are of his own .If he does not take care of the goods, and if the goods are lost, he will be liable for that loss. But he shall not be liable for the loss of the goods, if he has taken sufficient care. (2) Responsible for Damage: If the bailee does not take proper care of the goods and if the goods are lost due to his carelessness, then he has to pay for the loss of the goods or damages to the bailor. In the same manner X will have to compensate Y even if Mr. Z has used it with care. Similarly in this time limit. The car meets with an accident on the third day Mr. X has to compensate to Mr. Y. (3) Duty to return the goods: When the purpose is over, it will be duty of the bailee to return the goods to the bailor or to dispose off the goods according to the instructions of the bailor. If the goods are not returned in time, then the bailee is liable to pay the losses after the time. (4) Not to make unauthorized use: It is the duty of the bailee not to make unauthorized use of the goods. E.g. If A gives his scooter to B with a condition that he shall not go out the city limits. B goes out of the city limits and suffers some damages, then B has to pay for such damages. (5) Not to create the adverse title: This means not to make some other owner of the goods than the bailor himself. Here, it is the duty of the bailee to protect the goods from all other parties except the bailor but he shall not create an adverse title against the real owner, the bailor. However he has a right to create title in the favour of some other person if he proves that he has a better title. (6) Not to mix other goods with the goods of bailor: It is the duty of the bailee not to mix his own goods with the bailors goods without his permission. Even then if he mixes, then it will be his duty to separate the goods and if for some reason the goods are not separable then the bailee must pay the bailor the damages.

(7) If the goods belonging to another person are found out then the finder of the goods is called bailee: It will be the duty of the finder the goods to take care the goods and to find out the real owner and to deliver him back his goods. However, he has a right to be paid for the expenses which he has incurred to keep the goods safe as well as in searching the real owner. He also has the right to keep the goods in his possession till he gets the expenses and can sell the goods and recover the expenses, if they are not paid by the owner. (8) Bailee should return increment in goods: If there is an increment in the goods, then it will be the duty of the bailee to return the goods with such increment. E.g. if a person finds a cow and if a calf is born to the cow, then the bailee should return the cow with the calf to the real owner. RIGHTS OF BAILEE(DUTIES OF THE BAILOR):(1) Right to lien: When the bailee has rendered some services for which the payment has not been made by the bailor, then the bailee has a right to keep the possession of the goods till the charges are paid by the bailor. But this right of lien is only a particular right of lien and the bailee can not keep the possession of those goods for which the payment is not due. He can only keep the goods for which the payment is not mode. (2) Right to receive dthe damages from the defect of the goods: If there is any defect in the goods, then it is the duty of the bailor to inform the bailee about the defect in the goods and if the bailor knows about the defect and does not inform to the bailee, then the bailee can recover any loss he has suffered due to such defect. But if the Bailment is regarding the hire of the goods then the bailee can recover any loss that he has suffered as a result of defect in the goods, whether the bailor knows or does not know about it. E.g . X is the owner of scooter. He gives that scooter to Y.X does not know that brakes are not working, Y is injured. Y can not ask for damages as X did not know about it. If X knew about the defect the brakes, then he will have to pay compensation to Y for the damages suffered by Y. However if Mr. An takes scooter on hire from Mr. B The brake of the scooter is defective. B does not know about it. A meets with an accident. B is liable to pay compensation because from B without it, then B will not be liable. 3) Right to return the goods: Bailee has a right to return the goods to any one of the bailors if there are many bailors. He has a right to deliver the goods according to the instructions of any one bailor or its owner in the absence of contract to that effect. (4) Right to protect the goods:

He has also a right to protect the goods against all the persons except the bailor. If some other person claims the goods then he has a right to apply to the court to stop the delivery of goods and to establish a correct title. (5) Right to recover expences: It is the duty of the bailee to incur expenses for protecting the goods. However, he can recover such extra-ordinary expenses as are incurred by him for protecting the goods. (6) If the bailee returns the goods to the bailor in good faith without having knowledge of his defective title then also he is not responsible. (7) if some third deprives the bailee from using having possession of goods, he as well as the bailor can sue for their rights. QUE 5: Definition of Finder Goods / Rights and Duties of Finder of Goods. A finder of the goods is a person who finds the goods belonging to some other person and keeps them under his protection till the actual owner of the goods is found. Finder of goods is a special case of Bailment. . Here there is an unintended formation of the contract. The finder of the goods automatically becomes bailee even when there is no bailment from the bailor. The finder of goods has basically two duties : A) Search the real owner and return the goods back to him. B) Take good care of the goods until they are returned back to the real owner. 1. He must try to find out the real owner or the goods. When the real is found out, he has to return the goods to him with the increment if an increment has taken place in the goods.

2. According the provision of ICA the finder of goods has a right of being paid for the expenses incurred by him in finding the owner of the goods as well as for keeping the goods in good condition. He also has a right of particular lien over the goods found by him and to refuse to deliver the goods to the real owner until his charges are paid. 3. Finder of the goods has right to sell the goods when the following conditions are satisfied. A) When the thing found out is commonly the subject of the sale. B) When the real owner can not be found with reasonable efforts or he refuses to pay the lawful charges of the finder. C) When the thing is perishable or when the charges of the finder exceeds two third of the value of the goods. D) Where the owner has offered a specific reward for the return of the goods lost, the finder may sue for such reward and may retain the goods until he receives that reward.

Que 6: What is the Pledge? What are the rights of Pawnee and Pawnor? Pledge: Pledge is a special form of Bailment. It is the bailment of goods as security for payment of debt or performance of a promise. Here the person who pledges the goods is known as pawnor and the person who accept goods or the pledge is known as pawnee. Here pawnee just accepts goods as security. He does not have any other right on the goods. He can not use the goods personally or change the form of goods. He is under an obligation to return the goods as soon as pawnor returns the loan or performs his promise. However pawnee has been given certain rights. Rights of Pawnee: (duties of pawnor) 1. Retainer (Section 173) The Pawnee has a right to retain the goods belonging to pawnor not only for amount of loans or performance of promise but also for interest and all other expenses that he has incurred for preserving the goods pledged. 2. Retention for subsequent advances: (Section 174) Unless there is a contract to the contrary, the pawnee would be entitled to retain the goods for subsequent advances also. 3. Right to extra ordinary expenses:(Section-175) The Pawnee has a right to action but only right of lien on goods for receiving any extraordinary expenses incurred by him on preservation of goods. 4. Right in case of Pawnors default:(Section 177) If the pawnor makes default in the payment of debt or the performance of promise, the pawnee. * Can retain the pledge goods as security and file a suit against the pawnor for the loan given or promise made OR * Can dispose off the goods after giving a reasonable notice to the pawnor. If the proceeds are in the excess of the loan amount and other dues he has to return that money to the pawnor and if the value of the goods sold falls short of the amount due to him, the pawnee can file a suit for the recovery of money. Here the pledgee can sell the goods even when he is a non owner. If the Pawnor fails to pay the debt or perform his promise within stipulated time limit, he can recover goods after that date but before the Pawnee sells out the goods after giving due notice to the Pawnor. However, here he will have to pay additional expenses also caused by his default. If the pawnor demands his goods and pawnee refuses to handover the goods, the pawnor can file a suit within a period of three years from the date of refusal.

Que 7: What is meant by lien? What is the difference between Specific lien and Llien means the right to keep possession of the goods belonging to another, so long as a particular demand is not fulfilled or a particular payment is not made. Example:Raj gives his marriage suit for stitching to Kumar, a tailor and Kumar refuses to deliver the suit to Raj so long as his stitching charges are not paid then Kumar is said to be having a lien on the goods of Raj. The lien is of two types:1. Specific or particular lien. 2. General lien. 1. Specific or particular lien:This right is available to a bailee against the bailor when the bailee has rendered some labour or has rendered a service requiring some skill to the bailor. The bailee can refuse to deliver the goods to the bailor until the payment due for his services is not made. However here the conditions are as follows:a. The right of lien is available only till such time as the goods are in the possession of the bailee. b. The bailee can keep only those goods under his lien for which the payment is due. He cannot keep the goods under his lien for some payment due in the past of some other goods. c. There should not be any other contract contrary to this particular contract. d. The services rendered by the bailee should be according to the contract. The purpose of Bailment or the function of Bailment should have been served. The following parties enjoy particular lien: 1. Finder of goods for the expenses that he has incurred. (Section 168) 2. The person who has accepted some property as a pledge and has lent money to the pledger. (Section 179) 3. Agent appointed by a principal who has rendered some service to the principal. (Section 221) 4. Unpaid seller (section 47 of Indian Sale of goods act) 2. General lien:General lien is the one where a person is allowed to keep certain goods in his possession not only for the payment due on the present goods but also for all other

payments due from the owner of the goods to be payable for some past transactions. The following parties enjoy particular lien:(section 171) 1. Shroffs and bankers, 2. Traders or factors, 3. Wharfingers (officers of port godowns) 4. Policy brokers, 5. High court attorneys, 6. Express agreements made in favour of some person. The following circumstances lead to the end of lien: 1. When the payment for the goods is made. 2. When the bailee voluntarily and unconditionally let goes his right. 3. Where there is a contract between the parties against the right of lien. Que 8. Write a note on :Pledge by non-owners: Only the owner of the goods can pledge his goods. However there are cases where pledge by non-owners can also be regarded as valid. 1. Mercantile agents: A mercantile agent means a customary agent having authority either to buy or to sell or to consign or to raise money on the security of some goods such an agent who is in possession of goods, or documents of title, with the consent of the owner can make a valid pledge of goods in the ordinary course of business. Such a pledge will be valid even if the agent had no actual authority to pledge the goods and the pledgee does not have knowledge anout absence of authority of the pawnor provided he acts in good faith. 2. Person in possession under a voidable contract (section 178 A) A person having possession of goods under a voidable contract can also pledge the goods if the pawnee acts in good faith and he is not aware of defective title of the owner provided the contract has not been rescind at the time of the owner provided the contract has not been rescind at the time of pledge. 3. Pledger having limited interest (section 179) When a person having limited interest in goods pledges goods, the pledge is valid to the extent of that interest e.g.X gives his suit for stitching to Y. The stitching charge is Rs.1000, Y pledges the goods with Z for Rs.3000. X can recovers the suit from Z by paying Rs.1000. 4. Seller in possession of goods after sale (section 30(1) of the Indian sale of Goods Act)

A seller, in possession of goods sold is no more owner of the goods can pledge the goods. Such a pledge would be valid provided the pawnee acts in good faith and has no notice of the previous sale. The buyer can obtain damages from the seller but cannot revover the goods from the pledgee. 5. Buyer in Possession of goods under an agreement to sell (section 30(2) of Indian sale of Goods Act) The buyer who is in possession of goods under an agreement of sell with the consent of the seller, the ownership of which is going to pass to the buyer at some future date on payment of the price may pledge the goods such a pledge would be valid if the pawnee acts in good faith without having knowledge of the defective title of the buyer. 6. Co-owner in possession: If there are several co-owner of some goods, one of them can make a valid pledge of the goods with the consent of the co-owners. Que 9: Define Agency. How is Agency created? Agency may be defined as the legal relationship which exists when one person (the agent) is employed another person (the principal) to bring the principal into a legal relationship with third party. E.g. A wants to buy a scooter. He appoints B as his agent. The B brings C to meet A. Here, C is the third party. A is the principal and B is the agent. The section 182 of the Indian Contract Act, 1872 defines the agent and the principal as follows. An agent is a person employed to do any act for another and to represent another in dealing with the third persons. The person for whom such act is done or who is represented is representation is called principal. Important features of Agency contract: 1. Principal must be major: According to section 183 of the Indian Contract Act, the person appointing the agent the principal must be major and must be of a sound mind. 2. Agent may be completent to contract: According to section 184, the agent need not be a major or even competent to contract. In all other contracts, the parties entering into contract must be competent to contract. However the agent may be a minor or even a mentally unsound person. However the principal cannot take any legal action against such people as they cannot be held liable for misconduct or negligence. 3. Consideration not necessary:

According to section 185, no consideration is necessary for the formation of an agency contracts. The very fact that principal has agreed to be represented by the agent is sufficient detriment or consideration for contract. However an agent without consideration is gratuitous agent and therefore is not bound to do work as assigned to him by the principal. But if such an agent has once started his work, he must complete it. However the fact is that usually an agent is paid remuneration for his services. 4. Agency work: Whatever a person is competent to do, he can do through an agent. However this would not apply in case of work requiring personal skill. 5. Binding: Whatever is done by an agent is presumed to have been done by the principal. The agent can bind the principal by his acts and the principal can enforce the contracts done by the agent on his behalf. 6. Test of agency: Agency is said to be existing whenever a person has an authority to act for the other and to create contractual relationship between this other person and the third party. Ques 10 : State various modes of creation of Agency : The contract of agency is created (1) By an express or implied agreement between principal and the agent or (2) by ratification by the principal of agent s act performed on his behalf. 1. Express Agency: An express agency is created where the principal appoints the agent, either orally or in writing. 2. Implied Agency: Here the agency arises out of circumstances: A. Agency by Estoppel: When a person by his words or the conduct leads another person to believe that a certain person has acted on his behalf, then he can not deny the truth of such statements. Here, arises agency by Estoppel. B. Agency by Holding Out: If a person holds himself out as an agent of some person with the knowledge of that person and that person does not take any step to prevent him from this, he will be liable for the acts of that first person. Here, the agency by holding out is created. C. Agency by Necessity: For example a loan is borrowed by the captain of the ship to carry out the repairs of the ship to make it sea-worthy (Fit for sea journey) without the

knowledge of the owner as it is not possible to contact him, is agency by necessity. However the condition is that the cat of the agent must be bonafide and for the benefit of the principal. 3. Agency by Ratification: When a person adopts or recognizes the acts of another, who acted as his agent without his knowledge and without authority, the contract of agency is created by ratification. Here, there is retrospective operation of the authority. What is an agency by holding out? Suppose that you have got a servant in your house. He everyday goes to the market and makes necessary purchases eventhough he is not given any authority to do so. But you always pay for his purchases. Now one day, he makes a big purchase and runs away. In this case, you will be liable to pay for the purchases. This is because you allowed the businessman to believe that the servant was your agent as you always paid for his purchases. This is agency by holding out. Thus, in agency by holding out, when one person acts as if he is an agent of another with the knowledge of that person and if that other person does not do anything to stop him, the other person will be liable to pay for the acts of the first person, under the agreement of agency by holding out. Que 11: Explain Sub-Agent and Substituted Agent When can an agent have a subagent? An agent is a person who brings about a contract between the principal and the third party. The agent has got the borrowed power. The general rule is that a delegatee can not further delegate, and so ordinarily there cannot be a sub agency. A sub agent is a person employed by and acting under the control of the original agent in the business of agency. A sub-agent is appointed by the agent. He acts under the control and direction of the agent. However in below mentioned cases, the appointment of the sub-agent is legal and valid. 1. Where the nature of the work is such that it can not be carried out by the agent in person e.g. an agent appointed in Mumbai to purchase goods from L A. 2. Where the rules and regulations and traditions of the trade permit the appointment of a sun-agent e.g. Bombay Stock Exchange Brokers association by rule permits the appointment of sub-agent (Usage over-rules the written law) 3. Where the principal himself has authorized the delegation of such powers. 4. Where is act to be done is purely clerical and does not require the exercise of discretion (independent thinking) E.g. A tells a lawyer B to handle his case in a court. B can not hand over that case to C. But he can definitely appoint C for some clerical work.

In the above circumstances, the sub-agent is properly appointed, In the rest of the circumstances, the sub-agent is improperly appointed. Substituted Agent: A person is known as a substituted agent if the agent leaves a transactions and the newly appointed person works on the business of the agency. E.g. X wants to sell his plot of land. He tells his solicitor to do this job. Here the solicitor is the agent. However the solicitor suggests the name of Mr. Bhatia for this work and if the work is so given Bhatia is a substitute agent. Thus a substituted agent is not the agent of the agent but that of the principal. 1. He is appointed at the request of the Principal. 2. He holds an express or implied authority to act on behalf of the principal. Que 13: What is agency by rarification? What are the requisites of a valid ratification? An agent is the one who brings about the contract between the principal and the third party. Thus, the agent has got borrowed authority and is given that authority to commit certain acts on behalf of his principal. But in certain cases, a person may act as an agent of another person in absence of authority or in excess of authority. In both these cases, ratification would be necessary for agent. Agency by ratification: The ratification means acceptance of acts of an agent by the principal done without authority or in excess of authority. In ratification, there would be retrospective operation of authority. The ratification is related back to the date when the act was committed and not on the day on which the principal ratifies. The following are the essentials of a valid ratification: A. A person who is the principal can alone ratify the acts done one his behalf, No other person is authorized to do so. B. The person who is ratifying an act must be competent to contract or competent to do that particular act. E.g. An act of Municipal corporation to run a Textile mill can not be ratified by the corporators because a municipal corporation can not run a mill. C. A void act can not be ratified. An act of agent to enter into contract with a minor can not be ratified by the principal because the original act is void. D. An Unborn principal can not ratify the acts done before his birth on his behalf e.gAgreements entered by promoters before they received the certificate of incorporation for their company connot be accepted as valid by the company. New fresh contracts would have to do entered into.

E. Ratification must be of the entire transaction, unsuitable or non-beneficial part of the contract can not be weeded out.(to remove) F. The ratification must be done by the principal with full knowledge of facts. A ratification done by the principal without full knowledge of facts will not be valid unless the principal does not want to exercise his thinking and accepts all acts of his agent. G. Ratification can be done within a reasonable time. H. The ratification can be done only for the acts done for the benefit of the ratifier. The principal cannot ratify the acts done for the benefit of some other person. I. Ratification can be done for legal acts and not illegal acts. J. Ratification does not permit the agent to do that act repetitively. K. The party which is affected by ratification should be informed of the ratification. L. Ratification can not be made so as to subject a third party to damages or terminate any right or interest of a third person. E.g. A teacher Z appoints X teacher to teach a student in place of Y teacher. The ratification can not be done so as to harm the interests of Y. Que 14:- Give an idea about Agency coupled with interest. Irrevocable agency:(Agency coupled with interest) Agency is a result of contract between the principal and the agent. Being a contract it is well within the right of the principal to end the contract with the agent. In the same manner the agent also has a right to leave the business of agency at any time according to his choice. However in case when the agency can not be terminated or can be put to an end by the choice of the principal, the agency is said to be irrevocable. There are few such instances. 1. Agency coupled with interest:(section 202) When the agent himself has interest in the property which is the subject matter of agency, the agency can not be brought to an end by the principal in the way prejudicial to his interest. Mr A is an estate broker ,Mr B is the owner of a piece of land. Mr A has advanced a loan of Rs.50000 to Mr B. Mr B has appointed Mr A to dispose off his land and has agreed with him that Mr A would cover his loan from the sales proceeds of the land.Here Mr B cannot terminate the agency rights of Mr A so long he has not been paid out his dues. For Mr A it is an agency coupled with interest. 2. When agent has incurred a personal liability:(section 203)

The principal has a right to revoke the authority given to the agent anytime before the agent has used his authority so as to bind the principal .Once the authority has been used, his services cannot be terminated. 3. Where the agent has party exercised his authority:(section 204) According to the above principle it follows that the authority of the agent becomes irrevocable where it is partly used. Que 15:-How does agency come to an end? OR State the circumstences of the termination of Agency. Agency is a contract in which one person X- the principal appoints another person Y. The agent- to bring him the contract of some third person Z. The agency contract comes to an end under the following circumstances. These circumstances are described in the sections 120 to 201 of the Indian Contract act. Due to the action of the contracting parties:1. Cancellation of the agency contract: The principal can cancel the appointment of the agent before he starts his agency work. In case of continuing agency, the agency contract can be cancelled by giving a notice to the agent or third parties related to the agency work. If such a notice is not given and the agent continues performing his duty, the Principal has to pay remuneration to the agent and the Principal is also liable to the third parties with whom the agent has made contracts. 2. Agency business is discontinued: When an agent also can relieve himself from the agency contract by giving a proper notice to him principal. 3. Completion of Agency work: Agent also has been appointed for a particular purpose, and if that purpose is over the agent can tell the principal that his job has been done. Due to Operation of the Law:1. Completion of time duration: If the agency is for a particular time period, it comes to an end when that time period is over. 2. Object: If the agency is for a particular object, it comes to an end when that object is over. 3. Destruction of subject matter: When the subject matter for which the agency has been brought into existence is destroyed, the agency ends. E.g. Mr X has appointed Mr Y to purchase a flat for him and the flat collapses in an earthquake.

4. Death or insanity: The agency contract also comes to an end when either the principal or the agent dies or goes mad. 5. Bankruptcy of the Principal: If the principal goes bankrupt the agency contract comes to an end. However, the insolvency of the agent does not affect the agency contract. 6. Foreign enemy: If the principal belongs to a foreign country and he becomes a foreign enemy due to the outbreak of war with that country then also the agency comes to an end. 7. Subagent: When the rights of the agents are terminated, the rights of subagent also come to an end. 8. Adverse title: When agent gives up the agency work or creates an adverse title then also the agency ends. 9. Winding up of the company: When a company is wound up the company as well as the agency contract both come to an end.