Section 255 The Indian Contract Act, 1872
Section 255 of the Indian Contract Act, 1872 deals with the rights of a mercantile agent in possession of goods or documents of title.
📜 Section 255 – Rights of Mercantile Agent in Possession
"When a mercantile agent is in possession of goods or documents of title to goods, the mercantile agent has, in the absence of express contract to the contrary, power—
(a) to sell the goods;
(b) to pledge the goods; and
(c) to give a valid receipt for the goods;*and the principal is bound by any act of the mercantile agent which is done in the ordinary course of business of the kind carried on by the mercantile agent."
🔍 Explanation:
A mercantile agent (like a commercial agent or broker) who is in possession of goods or their documents is generally empowered to:
Sell the goods,
Pledge (mortgage) the goods, and
Give valid receipts for the goods,
unless there is a specific agreement that restricts these powers.
✅ Key Points:
The agent’s power applies unless expressly restricted.
Acts done in the ordinary course of business bind the principal.
Protects third parties dealing with mercantile agents in good faith.
Encourages smooth business transactions by recognizing the agent’s authority.
💡 Example:
A mercantile agent holding goods on behalf of a principal sells the goods to a buyer. Even if the agent was not expressly authorized to sell, the sale is valid and binding on the principal if it was done in the ordinary course of business.
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