Contracts

of
Agency
Contracts of Agency
Sec 182 of the Indian contract act,1872 defines Agent
and Principal as:
 Agent means a person employed to do any act for
another or to represent another in dealing with the
third persons and
The principal means a person for whom such act is
done or who is so represented.
Contracts of Agency
An agent does not act on his own behalf but acts on
behalf of his principal. He either represents his
principal in transactions with third parties or
performs an act for the principal. The question as to
whether a particular persons is an agent can be
verified by finding out if his acts bind the principal or
not
Creation of agency

Any person who is of the age of majority and is of sound

mind may employ an agent.(section183)
Between the principal and the third persons, any person
may become an agent. But no person who is a minor
and of unsound mind can become an agent.(184)
No consideration is necessary to create an agency.(185)
It is not essential that a contract of agency be entered in
to. It is sufficient if a person acts on behalf of another
and is accepted by the latter.
Creation of agency
 An agency can be created either in writing or orally.
An oral appointment is a valid appointment even
though the contract of agency by which agent is
authorized has to be in writing.
 Creation of Agency
1. Express Agreement
2. Implied Agreement
Types of Implied Agency
Agency by Estoppel or Holding out
Agency by Necessity
Agency in Emergency
Agency by Ratification
Types of Mercantile Agents
Factor
Commission agent
Del credere Agent
Broker
Auctioneer
RIGHTS AND DUTIES OF PARTIES
 Duties of Agent
 An agent is bound to conduct the business of his principal
according to the directions given, or in the absence of directions,
according to the custom.
 An agent is bound to conduct the business of the agency with as
much skill as is generally possessed by persons engaged in similar
business unless the principal has notice of his want of skill.
 An agent is bound to render proper accounts to his principal, and
has duty, irrespective of any contract to that effect, to produce
vouchers by which items of disbursement are supported as part of
the obligation to render proper accounts to the principal on
demand.(section213)
 RIGHTS AND DUTIES OF PARTIES

It is duty of an agent in cases of difficulty, to use all

reasonable diligence in communicating with his
principal and seeking to obtain his instruction
(section214)
An agent should not set up an adverse title to the goods
which he receives from the principal as an agent.
An agent is duty bond to pay sums received to the
principal on his account.
RIGHTS AND DUTIES OF PARTIES
 An agent must not use confidential information entrusted to him
by his principal for his own benefit or against the principal.
 The agent must not make secret profit from the extract agency. He
must disclose any extra profit that he may make.
 An agent must not allow his interest conflict with his duty. For
example, he must not compete with his principal.
 An agent must not delegate his authority to a sub-agent . This rule
is based on the principle Delegatus non protest delegare a delegate
cannot further delegate(section190).
RIGHTS OF AGENT
The agent has a right to retain any sums received on
account of the principal in the business of the agency,
all moneys due to himself in respect of his remuneration
and advances made or expenses properly incurred by
him in conducting such business.
The agent has a right to receive remuneration.
Right of lien: In the absence of any contract to the
contrary, an agent is entitled to retain goods, papers and
other property.
RIGHTS OF AGENT
 The employer of an agent is bound to indemnify him against the
consequences of all lawful acts done by such agent in exercise of
the authority conferred upon him.
 Where he has bought goods for his principal by incurring a
personal liability, he has a right of stoppage in transit against the
principal, in respect of the money which he has paid or is liable to
pay.
 Where he is personally liable to the principal for the price of the
goods sold, he stands in the position of an unpaid seller towards
the buyer and can stop the goods in transit on the insolvency of
the buyer.
RIGHTS OF PRINCIPAL
Right to repudiate the Transaction
To claim any resulted benefit from Agency
Right to Recover Damages
To Resist Agent’s claim for Indemnity
DUTIES OF PRINCIPAL
To indemnify against consequences of all lawful acts
of agent
To indemnify the agent against consequences of acts
done in good faith
To pay compensation against agent’s injury
To pay the agent the commission or other
remuneration agreed.
TERMINATION OF AGENCY
According to section 201, an agency is terminated by:
By an agreement between the parties, or
By the principal revoking his authority; or
By the agent renouncing the business of agency; or
By the business of agency being completed; or
By either the principal or the agent dying or becoming
of unsound mind; or
TERMINATION OF AGENCY
By the principal being adjudicated an insolvent under
the provisions of any Act for the time being in force
for relief of insolvent debtors.
AGENCY MAY BE TERMINATED BY
Agreement
Revocation of authority by the principal
By operation of Law
By operation of Law
 On performance of the contract. Where an agent is appointed to
perform a specified transaction, his authority comes to an end on
the completion of the said transaction.
 On expiry of time.
 When the agent or the principal dies or becomes of unsound mind.
The death of the agent terminates his authority.
 The death of one of the joint agents will terminate the agency only
as far as he is concerned, while it will continue to be valid as
regards the other surviving agents in the absence of contrary
intention.
BY OPERATION OF LAW
On the insolvency of the principal
On the destruction of the subject matter.
On the principal becoming an alien enemy.
On the dissolution of a company.
On termination of sub-agent’s authority.
 EXCEPTIONS

Irrevocable Agency:- When an agency cannot be put

an end to, it is said to be irrevocable agency. An
agency is irrevocable where the agent himself has an
interest in the property which forms the subject-
matter of the agency.
Time when Termination takes Effect:- The
termination of the authority of an agent does not, so
far as regards the agent, take effect before it
becomes known to him. As regards third persons, it
terminates when it comes to their notice.
Thank you