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CA Foundation doubt

Will Z succeed against X when agent Y exceeds his ₹10 lakh limit, and does Section 228 or 233 apply?

X has made an agency agreement with Y to authorize him to purchase goods on the behalf of X for the year 2020 only. The agency agreement was signed by both and

X has made an agency agreement with Y to authorize him to purchase goods on the behalf of X for the year 2020 only. The agency agreement was signed by both and it contains all the terms and conditions for the agent. It has a condition that Y is allowed to purchase goods maximum upto the value of ₹10 lakhs only. In the month of April 2020, Y has purchased a single item of 12 lakhs from Z as an agent of X. The market value of the item purchased was 14 lakhs but a discount of 2 lakhs was given by Z. The agent Y has purchased this item due to heavy discount offered and the financially benefit to X. Sol. 28 After delivery of the item z has demanded the payment from X as Y is the agent of X. But X denied to make the payment stating that Y has exceeded his authority as an agent therefore he is not liable for this purchase. Z has filed a suit against X for payment. Decide whether Z will succeed in his suit against X for recovery of payment as per provisions of The Indian Contract Act, 1872. Isme section 228 apply hoga ki section 233 of unit9

Asked by Priya··1 answer

1 reply

  1. BrunoAI answerAI first answer — verify with your teacher

    Section 228 applies here, not Section 233. Z will not succeed against X. 1. Section 227: if the authorised part can be separated from the excess, the principal is bound only for the authorised part. 2. Section 228: if they cannot be separated, the principal is not bound at all. 3. Here Y bought a single item for ₹12 lakhs against a ₹10 lakh limit. One item cannot be split into ₹10 lakh plus ₹2 lakh, so X is not liable. The discount or benefit to X does not change this. 4. Z can recover from Y, who exceeded his authority. Z could also claim from X if X ratifies the purchase. Section 233 applies only where the agent is personally liable. Then the third party may sue the agent, the principal, or both. That is not the issue here.

Related questions

What is the difference between Section 227 and Section 228 of the Indian Contract Act?

Section 227 covers cases where the excess act is separable, so the principal is bound for the authorised part. Section 228 covers cases where it is not separable, so the principal is not bound.

When does Section 233 of the Indian Contract Act apply?

It applies where the agent is personally liable; the third party may then hold the agent, the principal, or both liable.

Can a third party recover from the agent who exceeded his authority?

Yes, the third party can generally proceed against the agent who acted beyond his authority, unless the principal ratifies the act.

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