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Ramesh, an agent authorized to sell goods on credit, sells to Hakam Singh without making the usual…

An agent must act with reasonable diligence and compensate the principal for direct consequences of neglect. Illustration (b) to section 212 uses a credit sale to an…

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Ramesh, an agent authorized to sell goods on credit, sells to Hakam Singh without making the usual inquiries about solvency. Hakam Singh was insolvent at the time. The omission directly causes the principal to lose the price. What is Ramesh’s liability under section 212 of the Indian Contract Act, 1872?

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Answer and explanation

Correct answer A

An agent must act with reasonable diligence and compensate the principal for direct consequences of neglect. Illustration (b) to section 212 uses a credit sale to an insolvent buyer after the agent failed to make proper and usual inquiries.

Option feedback

Option A

Section 212 makes an agent compensate the principal for the direct consequences of neglect.

Option B

An ordinary task still requires reasonable diligence.

Option C

Authority to sell on credit does not excuse negligent performance of that task.

Option D

Section 212 requires compensation for directly caused loss and provides no automatic equal split.

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