Agent

An agent is a person employed to do an act

for another or to represent another in
dealings with third persons.
 Principal

The party who employs

another person to act on his or
her behalf.
 Agency
• Agency relationships are formed by the mutual
consent of a PRINCIPAL and an agent.

• Agency is the fiduciary relationship “which results

from the manifestation of consent by one person to
another that the other shall act in his behalf and
subject to his control, and consent by the other so to
act.”
Law of Agency
“Law of Agency is a contractual relationship between
two persons viz. created by an agreement express
or implied, the agent and the principal.”
‘Agent’(S.182) – is a person employed to do an act
for another or to represent another in dealing with
third persons.
The person for whom such act is done or who is so
represented is called the ‘Principal’

The relationship so created is called the contract of

agency
 Who can employ an agent ????

A person who is the age of majority according to

the law to which he is subject, and who is of
sound mind , may employ an agent .
 Essentials of Contract of Agency
1. Contract: There must be relationship through an agreement
under which the agent represents his principal. The contract may
be express or implied.
2. Authority: The agent should be appointed by the principal
and confer authority to act for him.
3. Contractual Capacity: Principal must be competent i.e., a
minor or person of unsound mind cannot appoint an agent,
otherwise the agent shall be personally liable.
4. Liability: Authority conferred should be such as will make the
principal answerable to third parties.
5. Object of appointment: Is to establish relationship
between principal & his parties
6. Confidence: Relationship of agency is based on confidence
between principal & the agent
7. Consideration: No consideration is necessary to create an
agency.
8. Others: Other conditions of a valid contract like free consent &
legality of object also necessary for agency
 Classification of agents
• Special Agents – who is employed to do some
particular act or represent his principal in
some particular transaction. As soon as the act
is performed the authority of agent comes to
an end. E.g. An agent engaged to sell a house.
 Cont.….
• General Agent – who is employed to do all such acts
which are connected with the business of trade of his
employer.

• E.g.- A mercantile agent appointed by a

company can buy and sell the goods under the
normal course of business until or unless it is
not terminated by principal.
• Universal Agent – is one who is employed to
all such act which a principal can lawfully do &
can delegate. Agent has unlimited authority.
(Exclusive Rights)
• FROM THE POINT OF VIEW OF NATURE OF
WORK TO BE PERFORMED:
1. Factors – is a mercantile agent to whom the
possession of goods are given for the purpose
of selling them. He usually sells the goods in
own name. He can exercise a general right of
lien on the goods delivered to him for balance
of payment if any.
2. Auctioneer – is an agent who is appointed by
the principal to sell the goods on his behalf at
a public auction for a reward in form of
commission.
3. Broker – is an agent appointed by the
principal for the purpose of selling or buying
goods on his behalf. He do not have
possession of goods nor he can contract in his
own name. He bring seller & buyer together to
bargain. He gets commission ( brokerage ).
4. Del credere Agent – is one who guarantees to
his principal, the performance of the financial
obligation by party with whom he enters into
a contract on principal behalf, in consideration
of an extra commission. He becomes surety &
become liable on the default of third party.
5. Banker – act as a mercantile agent on behalf
of his customer when he collects cheques,
drafts, bills & pay insurance premium & buy or
sell securities.
 Creation of Agency
In any one of the following ways:
a. By Express Agreement
b. By Implied Agreement
c. By Ratification
d. By Operation of Law
 Creation of Agency

In any one of the following ways: a) By Express

Agreement (S.187):
• Principal appoints agent either by words spoken or written
• A person gives Power of Attorney (general or special)-
express deed is created
• Agents to execute deeds, grant/surrender leases, sign prospects
of a co. to act as proxy for a shareholder must be appointed by a
written deed
 Creation of Agency

b. By Implied Agreement (S.187):

• Arising out of conduct of the parties
• Inferred from circumstances
• Partners, servants, wife are regarded as agents by implication by
their relationship
• Principal will not be entitled limit the implied authority of the
agent without notice to the third party
 Creation of Agency

Implied agency includes the following:

i) Agency by estoppel
ii) Agency by holding out
iii) Agency by necessity

Estoppel – where a person leads willfully another person to believe

that a certain state of affairs exits and induces him to act on that
behalf so as to alter his previous position, he is estopped from
denying subsequently the fact of that state of affairs
 Creation of Agency

i) Agency by estoppel:
Agency by estoppel arises when a person is held out as an agent
a) even though he is actually not an agent, or b) after he ceased
to be an agent

ii) Agency by ‘Holding Out”:

Where a person permits another by a long course of conduct to
pledge his credit for certain purposes: he is bound by the act of
such person in pledging his credit for similar purposes, without
the previous permission of his master. This is a case of agency
by “Holding Out”.
Eg., A husband holds out his wife as having his authority and a
third party advances money to the wife on faith of the
conduct of the husband, the husband is liable for such
debts.
 Creation of Agency
iii) Agency by necessity:

Agency by necessity is conferred by law in certain

urgent circumstances.

Eg., In an emergency, a person protects the property or

interest of another which are in imminent danger and
consent of the owner cannot be obtained. In such
cases the law assumes the consent of the owner to
the creation of agency. The person protecting the
property would be deemed to be an agent provided he
acted bonafide in the interest of the owner.
 Creation of Agency

C. By Ratification:

• Subsequent adoption of an un-authorised act by a person done

on his behalf by another person.

• Ordinarily, a person is not bound by such unauthorized acts done

on his behalf, but if he later accepts them by ratifying, he
becomes the principal and the later becomes the agent.

• Ratification may be either expressed or implied.

 Rights of Agents
Rights against the principal:
1. Right to Receive Remuneration (S.219,220)
2. Right to Retainer (S.217)
3. Right to Lien (S.221)
4. Right to be indemnified (S.222)
5. Right to Compensation (S.225)
6. Right of Stoppage in Transit
7. Right to appoint Sub-agent or substituted Agent in
certain cases
8. Right to Compensation for Pre-mature Revocation of
Agency (S.205)
 Duties of Agent

Depends on nature of agency

1. Follow directions of Principal (S.211)
2. Conduct Business with reasonable Skill & Deligence (S.212)
3. Render Proper Accounts to Principal (S.213)
4. Communicate with Principal in Case of Difficulty (S.214)
5. Not to Deal on his Own Account (S.215)
6. Not to Make any Secret Profit (S.216)
7. Pay Sum Received for Principal (S.218)
8. Not to Delegate Authority (S.190)
9. On Principal’s Death or Insanity (S.205)
10. Not to Use Information Obtained in the Course of the
Agency against the Principal
11. Not to Set-up an Adverse Title
 Duties of Principal
(to an agent)

1. To indemnify against all lawful (in exercise of

authority conferred) acts
2. To indemnify against acts done in good
faith/injury to 3rd person (S.223)
3. To indemnify for injury caused by principal’s
neglect (S.225)
4. To pay commission & other remuneration
agreed
(However, where one person employs another to do an act
which is criminal, employer not liable to the agent, to
indemnify for consequences(S.224))
 Rights of Principal

When an agent fails in his duties

1. To Recover Damages
2. To Obtain an Account of Secret Profits &
Recover Them and Resist a Claim for
Remuneration
(Contract with 3rd party is not rendered void)
3. To Resist Claim for Indemnify against Liability
Incurred
 Termination of Agency

1. By the act of the parties

i) By mutual agreement
ii) By Revocation by the Principal
iii) By Revocation by the Agent
2. By operation of Law
i) By Performance or completion of Agency
ii) By Death or Insanity
iii) By Insolvency of the Principal
iv) By Expiry of Time
v) By Destruction of the Subject Matter
vi) By Dissolution of a Company
vii) By Principal or Agent becoming Alien Enemy