CONTRACT OF AGENCY

CREATION OF AGENCY TERMINATION OF AGENCY

DEFINITION OF AGENCY
An agency is founded upon a contract; either implied or expressed by which a person authorizes another person to do something on his behalf.

CONTRACT OF AGENCY cont- - Agent: is a person who is employed to do any act for another or to represent another in his dealings. Principal: the person for whom such act is done or the one, who is represented, is known as the principal.

KINDS OF AGENTS
Auctioneer: is authorized only to sell goods to the highest bidder at a public sale for a commission. Broker: is the one who brings about a contractual relation between the principal and a third party.

KINDS OF AGENTS cont - - Factor: is the one who is entrusted with

the possession of goods and empowered to sell them in his own name as apparent owner. He is remunerated by a commission.

KINDS OF AGENTS cont - - Commission: is the one who purchase

goods at the lowest price from one person and sell them to another without any profit, receiving only a commission for his services.

KINDS OF AGENTS cont - - Del credere agent: A Del Credere Agent is the one who, for an extra remuneration, acts as the surety for the purchaser and thus guarantees due performance of the contract by the buyer. In this the agent is to pay the principal, the money if the buyer does not pay.

CREATION OF AN AGENCY
1. Agency by authority: agency can be created when the principal confers the authority to an agent. It can be expressed or implied.

CREATION OF AN AGENCY cont- - 2. Agency by ratification: Ratification means the subsequent acceptance of an unauthorized act. Agency can be created, when a person acts on behalf of another without knowledge or assent and afterwards his act is accepted or ratified by the latter. If the act is not accepted, there is no agency and the person acting, as agent is personally liable.

Agency by ratification cont- - Example: A, buys 5 bags of wheat without the authority of B. B ratifies As act. A becomes his agent.

CREATION OF AN AGENCY cont - - Agency by Estoppel: Estoppel means that a person is stopped from denying the truth of a statement, which he has made. If a person by words or by conduct permits another person to act as his agent and to make contract on his behalf, he will be bound by contracts made by such persons on his behalf though he may not be in fact an agent.

Agency by Estoppel cont - - Example: A tells B in the presence of P that he is Ps agent. P does not object to this statement, and keeps quiet. Later on B enters into a contract with A, thinking that A is Ps agent. P is bound by this contract. P cannot say that A was not his agent

AGENT DUTIES
1. An agent is bound to conduct the business of the principal in accordance with the latters directions.

2. To conduct the business with as much skill. 3. To act with reasonable care in his dealings.

AGENT DUTIES cont - - 4. To render proper accounts to his principal. 5. In case of difficulty, to communicate with his principal.

6. An agent should not act on his own account.

AGENT DUTIES cont - - 7. An agent must not make any profit for himself out of the business or transaction entrusted to him beyond the commission or remuneration.

PRINCIPALS DUTIES
1. The principal must pay the agent such commission. 2. The principal is bound to compensate or indemnify the agent against the consequences.

PRINCIPALS DUTIES cont - - 3. The principal must make compensation to his agent in respect of any injury caused to such agent by the principals neglect. 4. The principal is bound to indemnify the agent against the consequences of any act, which the agent does in good faith.

TERMINATION OF AGENCY
By agreement of Parties: it can be terminated at any time and at any stage by the mutual agreement between the Principal and the agent.

TERMINATION OF AGENCY cont - - Revocation by the principal: the principal at any time may revoke the authority of the agent at any time before the agent has exercised his authority so as to bind the principal. But if the act has begun the authority can only be revoked subject to any claim, which the agent may have for breach of contract.

TERMINATION OF AGENCY cont - - Revocation by the agent: an agency can also be terminated by an express renunciation after giving a reasonable notice by the agent to the principal. Performance of the contract: the agency is terminated when the object is accomplished for which the agency was formed.

TERMINATION OF AGENCY cont - - Expiry of time: when the agent is appointed for a fixed period of time the agency comes to an end after the expiry of that time even if the work is not completed. Death and insanity: when the agent or the principal dies or becomes of unsound mind the agency is terminated.

TERMINATION OF AGENCY cont - - Insolvency: the insolvency of the principal puts an end to the agency. Principal becoming an alien enemy: when the agent and the principal are aliens the contract of an agency is valid so long as the countries of the Principal and the agent are at peace. If war breaks out between the two countries the contract of agency is terminated.