Governed under Part X of the Contract Act 1950

(Sec. 135) LAW OF AGENCY Qualification:

• Agent – person employed to do any act for • Principal – 18+ and who is sound of mind
another in dealing with the 3rd party • Agent – any person can become an agent
• Principal – person who is so represented (can be minor)
• Agency – relationship which subsists
between Principal and agent
DUTIES AGENT TO HIS PRINCIPAL
1) To obey the principal’s instructions Failure to obey may be treated as a breach of
contract and the agent liable for any loss sustained by the principal on account of
CREATION OF AGENCY the breach (Sec. 164 of CA) TERMINATION OF AGENCY
2) In the absence of instructions from principal, to act according to the custom which
BY EXPRESS APPOINTMENT An agency may be terminated by two ways:
prevail
Sec. 140 of Contract Act– An authority is said to be express when it is 1) By the act of the parties
3) To exercise care and diligence in carrying out of his work and to use such skill as he
given by words spoken or written a) By mutual consent
possesses (Sec. 165 of CA)
4) To render proper accounts when required (Sec. 166 of CA) b) By unilateral revocation by the principal (Sec. 154)
BY IMPLIED APPOINTMENT c) By unilateral renunciation by the agent (Sec. 154)
5) To pay to his principal all sums received on his behalf (Sec. 171 of CA)
i) When a person by his words or conduct holds out another • The termination can be made at any time by giving notice
6) To communicate with the principal (Sec. 167 of CA and Sec. 142 of CA)
person as having authority to act for him. • Revocation and renunciation may be expressed or implied
7) Not to let his own interest conflict with his duty
Example: If a person allows another to order goods on his in the conduct of the parties (Sec. 160)
8) Not to make any secret profit out of the performance of his duty
behalf and habitually pays for them, an agency may be Reasonable notice must be given in either revocation or
Secret profit refers to a bribe such as payment of a secret commission or any
Implied renunciation
financial advantage which an agent receives over and above the commission
ii) The relationship of principal and agent may exist between a Otherwise, the damage thereby resulting to the principal or
agreed by the principal and agent
husband and wife the agent, must be made good by the party in breach to the
Where the principal knows of the extra profit and consents to it, the agent is
iii) By Section 7 the Partnership Act 1961 (Revised 1974). other (Sec. 159)
entitled to keep the profit, as it is no longer secret (Sec. 168)
Partners are each other’s agents when contracting in the course of Exceptions (where principal is prevented from revoking the
9) Not to disclose confidential information or documents entrusted to him by his
the partnership business agent authority)
principal
10) Not to delegate his authority ▪ The agent himself has interest in the property (Sec. 155)
BY RATIFICATION ▪ After the authority has been party exercised by agent
The relation between principal and agent is a personal one and the agent cannot
Before agency by ratification can arise, one of two situations must (Sec. 157)
employ another person to do his duty. (but there is Exceptions)
exist: ▪ The notice of termination by principal could be effective
i) Where the principal approves of the delegation of authority
1) An agent who was duly appointed has exceeded his when it comes to the knowledge of the agent and 3rd
ii) Where it is presumed from the conduct of the parties that the agent would have
authority or party (Sec. 161)
power to delegate his authority
2) A person who has no authority to act for the principal has acted as if
iii) Where the customs of the trade or business permits delegation
he has the authority 2) By operation of law
iv) Where the nature of the agency is such that delegation of the authority to another
person is necessary to complete the business a) By the performance the contract of agency (Sec. 154)
Condition: 1) The act or contract must be unauthorized b) By the expiration of the period fixed or implied in the
v) In case of necessity or unforeseen emergency. Example: illness of the agent
2) The unauthorized act must be one which is legal contract of agency, even if the business has not been
vi) Where the act to be done is purely ministerial or clerical and does not involve the
3) The agent must, at the time of the contract, expressly completed
exercise of discretion case
act as agent for the principal (Sec. 149 of CA) c) By death of the principal or agent
He must not allow the third party to believe that he is the d) By the subsequent insanity of either the principal or agent
principal (Sec. 151)
4) The agent must have a principal, who is in actual BY NECESSITY
Condition: 1) There must be a real & actual emergency e) By the bankruptcy or insolvency of the principal (Sec. 154)
existence f) By the happening of an event which renders the agency
5) The principal must have contractual capacity at the time 2) Agent was entrusted with principal’s property
3) Agent was acted in good faith (bona fide) unlawful by the doctrine of frustration
when the contract is made and at the time of ratification
6) The principal must, at the time of ratification, have full 4) Impossible to get the principal’s instructions
EFFECT TERMINATION OF AGENCY BY OPERATION OF LAW
knowledge of all material facts of the contract
7) The principal must ratify the whole act or contract BY ESTOPPEL
If a person, by his words or conduct, allows a third party to believe that A is his agent, • Principal not bound by transactions with 3rd party through
8) The ratification must be made within reasonable time the medium of agent
Case: Metropolitan Asylum Board v Kingham and Sons when A is not and the third party relies on it to his detriment, that person will be
estopped or precluded from denying the existence of A’s • The agent will be personally liable to the 3rd party for the
9) The ratification not injure a 3rd party breach
authority