Distributor as buyer, not agent, means agency notice protections do not apply on termination.

A distributorship arrangement was treated as a contract of sale rather than an agency because the distributors bought goods for resale, paid the wholesale price, bore transit risk, and retained the resale margin. Applying Section 182 of the Indian Contract Act, 1872, the Court held that no principal-agent relationship arose, so the notice requirements governing agency under Section 206 did not apply. In any event, the termination letter giving about fifteen days' notice was considered sufficient in the circumstances. The consequence was that the termination of the distributorship was not invalid and the challenge failed.

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Issues: (i) Whether the parties stood in the relationship of principal and agent, or only of buyer and seller. (ii) Whether termination of the distributorship was invalid for want of reasonable notice under the law of agency.

Issue (i): Whether the parties stood in the relationship of principal and agent, or only of buyer and seller.

Analysis: The governing test was the definition of an agent under Section 182 of the Indian Contract Act, 1872, namely a person employed to act for another or to represent another in dealings with third persons. On the contents of the appointment letter, the course of dealing, the pricing arrangement, payment of the wholesale price, transfer of transportation risk, and the fact that the distributors retained the margin between retail and wholesale price, the contractual arrangement was found to be one of purchase for resale and not of representation of the manufacturer before third parties.

Conclusion: The relationship was held to be that of buyer and seller, not principal and agent.

Issue (ii): Whether termination of the distributorship was invalid for want of reasonable notice under the law of agency.

Analysis: Section 206 of the Indian Contract Act, 1872 applies only where a true agency exists. Since no agency was established, the complaint based on want of notice failed on that ground. In any event, the termination letter afforded about fifteen days' notice, which was treated as sufficient in the circumstances of the distributorship arrangement.

Conclusion: The termination was not invalid for want of reasonable notice.

Final Conclusion: The appeal failed because the courts below were in treating the arrangement as a contract of sale and in upholding the termination of the distributorship.

Ratio Decidendi: A distributor who purchases goods on payment of price, bears the transit risk, and merely resells them on a margin is not an agent within Section 182 of the Indian Contract Act, 1872; consequently, the safeguards governing termination of agency do not apply.

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