Unit-5 Contract of Agency

Program : MBA
Semester : III
Subject Code : MB0051
Subject Name : Legal Aspects of Business
Unit number :5
Unit Title :Contract of Agency
Lecture Number :1

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Lecture Outline

• Introduction
• Agent and Agency (Sec.182)
• Kinds of Agencies
• Classification of Agents
• Duties and Rights of Agent
• Principal’s Duties to the Agent and his Liability to Third Parties
• Personal Liability of Agent
• Termination of Agency
• Power of Attorney
• Activity

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Contract of Agency

Objectives

•Define agent
•Describe the types of agencies
•Explain the duties and rights of agent
•Explain the power of attorney

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Introduction

• To meet the rising demand, manufacturers and shopkeepers began to hire

others to work for them.

• These helpers or “servants” as they were called performed whatever

physical tasks were assigned to them, under the close personal supervision

of the “master”.

• Secs.182 to 238 of Indian Contract act, 1872 deal with the subject of

agency.

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Agent and Agency

• Agent “a person employed to do any act for another or to represent

another in dealings with third person”.

• The person for whom or on whose behalf he acts is called the Principal.

• The Relationship between the agent and principal is called agency.

• This relationship is based upon an agreement whereby one person acts for

another in transaction with a third person.

• Sec.183- Any person who is of the age of majority according to the law to

which he is subject and who is of sound mind, may employ agent.

• Sec-184- No person who is not of the age of majority and of sound mind

can become agent, as to be responsible to his principal.

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Kinds of Agencies

• Express agency (Sec.187)

• Implied agency (Sec.187)
• Agency by estoppel (Sec.237)
• Agency by holding out
• Agency of necessity (Sec.189)
• Agency by ratification (Secs.196-200)
• Agency coupled with interest

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Classification of Agents

• Special and general agents

• Mercantile or commercial agents

• Non-mercantile or non-commercial agents

• Sub-agent and substituted agent (Secs.190-195)

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Duties and Rights of Agent

Duties of agent

• To conduct the business of agency according to the principal’s directions

(Sec.211).
• The agent should conduct the business with the skill and diligence
• To render proper accounts (Sec.213)
• To communicate with the principal in case of difficulty (Sec.214)
• Not to make any secret profits
• Not to deal on his own account
• Not entitled to remuneration for misconduct (Sec.220).
• Not to disclose confidential information supplied
• To take all reasonable steps for the protection and preservation of the
interests entrusted to him

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Duties and Rights of Agent

Rights of agent

• Right to remuneration (Secs.219-220).

• Right of retainer (Sec.217).

• Right of lien (Sec.221).

• Right of stoppage in transit

• Right of indemnification (Secs.222-224).

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Principal’s Duties to the Agent and his Liability to Third Parties

Duties of a Principal

• He is bound to indemnify the agent against the consequences of all lawful

acts done by such agent in exercise of the authority conferred upon him

(Sec.222)

• He is liable to indemnify agent against the consequences of an act done in

good faith, though it causes an injury to the rights of third persons

(Sec.223)

• He is bound to compensate his agent in respect of injury caused to such

agent by the principal’s neglect or want of skill (Sec.225).

10

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Principal’s Duties to the Agent and his Liability to Third Parties

Liability of principal to third parties

• For all his acts done within the scope of his authority (Sec.226).
• For the acts of the agent falling not only within the actual authority but also
within the scope of his apparent or ostensible authority.
• Where agent exceeds his authority (Sec.227)
• For misrepresentations made or frauds committed by agent (Sec.238).
• To the third parties even where his name was not disclosed.
• Bound by any notice or information given to the agent in the course of
business transacted by him.
• In cases where agent is held personally liable. Sec.223.

11

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Principal’s Duties to the Agent and his Liability to Third Parties

Undisclosed principal

• Where agent, though discloses the fact that he is agent working for some
principal, conceals the name of the principal, such a principal is called an
undisclosed principal.

Concealed principal

• Where agent conceals not only the name of the principal but the very fact
that there is a principal, the principal is called a concealed principal.

12

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Personal Liability of Agent

• Sec.230- Being only a medium, the agent can, in the absence of a contract
to the contrary, neither personally enforce contracts entered into by him on
behalf of his principal, nor is he personally bound by them.
• Personal Liability of Agent-
• If there is an agreement to the effect exist:
i. where the contract is made by agent for the sale or purchase of
goods for a merchant resident abroad;
ii. where the agent does not disclose the name of his principal;
iii. where the principal, though disclosed, cannot be sued, for
instance, where principal is a minor

13

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Termination of Agency (Sec.201)

• On revocation by the principal

• On the expiry of fixed period of time

• On the performance of the specific purpose

• Insanity or death of the principal or agent

• In case the subject matter is either destroyed or rendered unlawful.

• Insolvency of the principal

• By renunciation of agency by the agent

14

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Termination of Agency

When termination of agency takes effect?

• The termination of the authority of agent does not, so far as regard the

agent, takes effect before it becomes known to him (Sec.208).

• As regards third parties, they can continue to deal with the agent till they

come to know of the termination of the authority (Sec.208).

• The termination of the authority of agent causes the termination of authority

of all sub-agents appointed by him.

15

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Power of Attorney

Sec.2(21) of the Stamp Act-

• Any instrument not chargeable with a fee under the law relating to court
fees for the time being in force, which empowers a specified person to act
for and in the name of the person executing it”.
• Powers of Attorney Act, 1882, but does not define it.
• A power of attorney may be special or general
Sec.32 (c) of the Registration Act, 1908-
“Where a document is presented for registration by the agent of a person
entitled to present it for registration, such agent must be duly authorized
by power of attorney executed and authenticated in manner as mentioned
in Sec.33 of the Act.”
• The power of attorney is required to be engrossed on non-judicial stamp
paper.
Sec.4 of the Power of Attorney Act, 1882-
“The original deed of power can be deposited in the High Court in whose
jurisdiction the principal resides and a certified copy of the deed can be
obtained from the High Court.”
16

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

Activity
Activity 1

Number of person who is not of the age of majority and of sound

mind can become agent. Provide your view on this.

Activity 2
Analyze the role and rights of agents in automobiles sector.

Activity 3
“ABC Ltd." consigned goods by XYZ Transport Ltd. The consignment,
at the time of delivery, was found damaged. After obtaining a
certificate of damages from the Transport Company, ABC Ltd.
claimed from the Railways compensation of Rs 5,300. The Transport
corp. sent him a cheque for Rs 4,000 in full and final settlement. The
cheque was encashed, but after a lapse of sometime. ABC Ltd.
claimed that the payment had satisfied only a part of his claim and
demanded payment of the balance. Discuss the claim of ABC Ltd. for
payment of the balance amount.
17

PREVIOUS HOME NEXT

 Unit-5 Contract of Agency

THANK YOU

18

PREVIOUS HOME NEXT