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Swathi Krishna

Swathi Krishna

CA Inter

7K+

14-Sep-20 11:35

26

Agency

On of the presumption of section 230 is the incompetent principal ,but if there exist a incompetent principle ,say minor, then how will it be a valid contract of agency?

Answers (9)

Suraj Lakhotia

Suraj Lakhotia

Admin

14-Sep-20 16:44

Can you elaborate your query.

Swathi Krishna

Swathi Krishna

CA Inter

7K+

14-Sep-20 18:47

One of the presumption of sec 230 is the incompetent principal But sec183 provides that only competent person can be become a prinicpal. So how does this persumption of section 230 be valid.?ie how can the third party sue the agent since there no valid contract of agency as per sec 183?

Suraj Lakhotia

Suraj Lakhotia

Admin

16-Sep-20 06:58

S.230 does not talk about incompetent principal.

Swathi Krishna

Swathi Krishna

CA Inter

7K+

16-Sep-20 13:31

The 3rd point of presumption

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CA YOGITA HARJANI

CA YOGITA HARJANI

Faculty

18-Sep-20 11:12

Swathi Krishna

Swathi Krishna

CA Inter

7K+

16-Sep-20 13:31


The 3rd point of presumption

Here the section talks about a situation where at the time of entering into the agency contact, the principal was competent, however, later on he becomes incompetent ( Eg : Accident causing amnesia) In such case, after the principal becomes incompetent, if agent takes any action, then he himself will be liable.

Swathi Krishna

Swathi Krishna

CA Inter

7K+

18-Sep-20 18:58

So in this minor case won't apply ?

CA YOGITA HARJANI

CA YOGITA HARJANI

Faculty

18-Sep-20 21:00

In case a person enters into contact of agency with a minor/incompetent principal, then such contact is void as principal cannot be incompetent. The sections relating to rights and liability of agent and principal will not be applicable. (As you mentioned correctly) However, section 230 says that in case someone still enters into an agency contact with an incompetent/minor person, then such incompetent/minor person will be protected from any liability coming from such arrangement. And the person who acting as agent will be bound for losses and damages. Moreover, in case incompetency occurs later in a valid contract of agency, then also protection will be given to the incompetent principal. This presumption in Sec 230, basically gives protection to incompetent person named as principal.

CA YOGITA HARJANI

CA YOGITA HARJANI

Faculty

18-Sep-20 21:18

In simple language, sec 230 says that "In case principal is disclosed but he Cannot be sued (ie, he is incompetent or non existent), it will be presumed that there is a contract saying agent will be personally liable and bound by all actions in the arrangement " Thus, in such case, agent will be liable because of this presumed contract of personal liability (& not agency contact which is void)

Swathi Krishna

Swathi Krishna

CA Inter

7K+

18-Sep-20 22:46

Thank you ma'am:)