Dalgety and Co. Ltd v R. E. D. Cluer (Civil Appeal No. 24 of 1960) [1961] EACA 36 (6 March 1961)

Key Facts

Transaction Type

Issues

• Whether the set-off claimed falls under s. 217 of the Indian Contract Act, which allows an agent to retain moneys received on account of the principal in the business of the agency, and whether 'the business of the agency' includes all transactions on a running account between principal and agent.
• Whether the appellants acted within the scope of their concealed agency when they submitted the claim to arbitration and paid the award despite the respondent's express instructions to take no further action, and whether their right to indemnity was forfeited by this non-compliance.
• Whether an agent is entitled to set-off damages paid to a third party against balance owed to the principal on other transactions when the parties maintain a running account concerned with multiple agency transactions, and whether the set-off falls under s. 217 of the Indian Contract Act.
• Whether an agent acting for an undisclosed principal is entitled to be indemnified by the principal for damages lawfully and reasonably spent in connection with a contract entered into on the principal's behalf, and whether the agent's right to indemnity was forfeited by non-compliance with the principal's directions.
• Whether the respondent ratified the contract entered into by the appellants with Watkins Ltd. by signing the memorandum of contract T.S. 6416, and whether this ratification acknowledged the appellants were entering into the contract as the respondent's agents.

Holdings

Remedies

Monetary Damages

Legal Principles

• When a person acting for an undisclosed principal contracts with a third party, they contract with that party as an apparent principal and render themselves primarily liable to the third party as principal, while at the same time, as between themselves and the undisclosed principal, they enter that contract as agent of the undisclosed principal and can recover from the latter any sum that they have lawfully and reasonably spent in connection with the contract while acting within the scope of that agency.
• By signing the memorandum of the contract sent to him by the appellants, the respondent ratified the contract which the appellants had entered into with Watkins Ltd. and also acknowledged that the appellants were in fact entering into the contract as his agents, although by reason of the non-disclosure of the agency to Watkins Ltd. the appellants were to be treated as contracting with Watkins Ltd. as principals.
• Where parties have a running account concerned with a number of different transactions which the one party conducts as agent for the other, then the 'business of the agency' includes all those transactions which are the subject of the running account and which are conducted between them upon the relationship of principal and agent, allowing the agent to set-off and debit against the principal's account.

Precedent Name

• Rhodes v. Fielder, Jones and Harrison
• Christoforides v. Terry
• Hichens, Harrison, Woolston & Co. v. Jackson & Sons

Key Disputed Contract Clauses

• Contract note No. 559 between appellants and Watkins Ltd. contained an arbitration clause providing that 'Any disputes arising under the contract to be settled by arbitration in London'. This clause was central to the dispute as the appellants submitted the claim to arbitration despite the respondent's instructions not to, and the court had to determine whether this action was within the scope of their agency.
• Contract note No. 559 recorded that 'as his agents the appellants would not be liable for non-fulfilment of the contract or for loss or damage to the goods or for delay caused by force majeure as therein defined'. This clause was part of the contractual terms between the appellants and Watkins Ltd., establishing the agents' limited liability for the shipment.

Cited Statute

Judge Name

Passage Text

• "Where, as in the present case, the parties have a running account, concerned with a number of different transactions which the one party conducts as agent for the other, then I would hold that the 'business of the agency' includes all those transactions which are the subject of the running account and which are conducted between them upon that relationship of principal and agent."
• "The appellants were entitled in law to set-off and debit the item of Shs. 11,011/58 in their account with the respondent. For all the foregoing reasons the appeal is allowed, the judgment of the court below is set aside, and the plaintiff-respondent's suit is dismissed, with costs to the appellants here and below."
• "when a person acting for an undisclosed principal contracts with a third party he contracts with that party as an apparent principal and renders himself primarily liable to the third party as principal, while at the same time, as between himself and the undisclosed principal whom he is screening from the third party, he enters that contract as agent of the undisclosed principal, and can recover from the latter any sum that he has lawfully and reasonably spent in connection with the contract while acting within the scope of that agency."

Damages / Relief Type