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AGENCY

S 182 An agent is a person employed to do any act foranother or to represent another in dealings with third persons.

The person for whom such act is done or who is so

represented is called the principal.

The essence of a contract of agency is the agentsrepresentative capacity coupled with his power to effect legal

relations of the principle with third persons.

An agent has the authority to act on behalf of his principle & to

create contractual relations between principle & a third party.

Ex: A employs B to sell his house on his behalf. B is Said to be

As agent for the transaction of sale of house.

Ex: P employs Q to buy 10 TV sets for him. Q is said to be Ps

agent for the transaction of purchase of TV sets.

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ESSENTIALS

1. There must be a contract

2. Employing a person to act for another or torepresent another

3. In dealings with third parties

Parties

1. Principal one who employs another to act on

his behalf or to represent him in dealings with

third parties

2. Agent One who is so employed

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Other features

Who may employ agent Any person who iscompetent to contract i.e. a major who is of soundmind may employ an agent. Whatever a person can dopersonally he can do through an agent.

Who may be an agent - Any person may be appointedas an agent. However where an agent is a minor or of

unsound mind, the principal shall be bound to the thirdpersons but the agent shall not be responsible to theprincipal. This is because a person who has nocapacity to enter into contract cannot bind himself.

No consideration- No consideration is necessary to

create a contract of agencyAgents are paid commission/ remuneration

only when they do acts for the principal or theyrepresent the principal.

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KINDS OF AGENT- Agents are classified on the basis of

their work & responsibilities.1) Mercantile agent- He is an agent having authority to

sell goods or buy goods or to raise money on the

security of the goods in course of his business.

Mercantile agents may bea) Factor- He is an agent whose ordinary business is

to sell or dispose of goods which are in his control &

possession

b) Broker He is an agent appointed to negotiate andmake contracts for sale or purchase of goods that the

goods are in the possession & control of principal.

c) Auctioneer- He is an agent who sells goods by

public auction to the highest bidder.

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d) Del credre agent- He is an agent who not only

establishes contract between his principal and third party

but also guarantees to his principal the due performance

of contract by third party. For giving guarantee, he gets

del credre commission.

e) Commission agent. He is an agent who charges some

commission for the work done by him for his principal.

2) Non- merchantile agent Agents who represent their

principals in transactions other than those of sale or

purchase of goods, are non-marchantile agents.

Ex: A director of a company acts as an agent of company

while dealing with third person.

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APPOINTMENT OF AN AGENT- The appointment of an

agent may be either express or implied. It is expresswhen he is appointed by a contract expressed either inwriting or orally

Ex: A gives a power of attorney to B to transact hisbusiness on his behalf. A is said to have appointed B as

his agent expressly.A contract of agency is implied when it is

implied from the circumstances of the case and theconduct or relationship of the parties . Thus whenever aa person places another in a situation in which that other

is understood to represent or to act for him he becomesan implied agent.

Ex: A meets with an accident and is injured. He is in needof medical assistance. B calls for the services of a

doctor. B acts as an agent of A impliedly .

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Agents authority Authority of an agent means

his capacity to bind the principal. The principal is

bound by the acts of his agent only when the

agent has acted within the scope of his authority.

The extent of an agents authority depends upon

1) The nature of the act or business he is to do

2) Things incidental to the business3) the usual trade customs & usages.

If the agent exceeds his authority the

principal is not bound by the unauthorised work

done by agent.

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Sub-Agent - Ordinarily an agent cannot delegatehis authority i.e an agent cannot appoint a sub-agent to his principal because when a principalappoints a person as his agent he invests(reposes) trusts & confidences in the agent. Anagent may appoint a sub-agent if the principalpermits. A sub-agent is under the control of the

original agent.Where the sub-agent is properly appointed,

the principal is bound by his acts. Where theappointment of a sub-agent is improper theprincipal is not bound by his acts.

The sub-agent is responsible for hisacts to the agent and the agent is responsible tothe principal for the acts of the sub-agent.

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DUTIES OF AGENT

1) TO FOLLOW INSTRUCTIONS- An agent isduty bound to carry out the instructions of hisprincipal in conducting his business. If theagent fails to do so and any loss is incurred hewill be held responsible for such loss to the

principal.

2) To exercise reasonable skill & diligence- Anagent must exercise reasonable skill &diligence in the conduct of business. He isexpected to act with as much skill as isgenerally possessed by persons engaged insimilar business. If any loss is caused to theprincipal due to neglect or want of skill on the

part of agent, then agent is responsible for it.

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3)To render proper accounts- An agent must

render proper accounts to his principal.

4)To avoid conflict of interest An agent must not

deal on his own A/c in the same business as

that of principal, without obtaining his consent.If he does so, the principal may repudiate the

agency.

5)Not to make secret profits- Since an agent is in

a fiduciary relationship with his principal, hemust not make secret profits in the business of

agency. If he does so , the principal can claim

the secret profits from him.

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6) To remit sums- The agent is bound to pay to hisprincipal all sums received on his account. He

may however deduct his lawful charges.7) Not to delegate authority- An agent must notdelegate his authority to another person exceptthe consent of his principal or where the

delegation is permitted by ordinary custom oftrade .

8) To communicate in case of emergency- In caseof an emergency an agent must promptly

communicate with his principal and obtain hisinstructions.

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RIGHTS OF A AGENT

1) Right to retention An agent has a right to retain fromthe money received in the course of agency , thefollowing sums

a) all money due to him in respect of advances

made or expresses incurred by him in conductingagency business

b) remuneration payable to him for acting as agent.

2) Right to remuneration An agent is entitled to his

agreed remuneration or when there is no agreementas to remuneration, then to a reasonableremuneration. An agent gets this right only when hehas completed the business of agency.

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3) Right of lien- An agent may retain goods,

papers and other movable or immovableproperty of the principle, in his possession,until the amount due to him is paid.

4) Right to indemnity An agent has a right to be

indemnified by the principal in respect of theconsequences of all lawful acts done by theagent in exercise of his authority.

5) Right to compensation Where an agent

suffers loss due to the principals neglect orwant of skill, he has a right to be compensatedby the principal.

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DUTIES OF PRINCIPAL

1) To indemnify or compensate his agent in

respect ofa) a lawful act done by agent within his authority.

b) an act done by agent in good faith, causing aninjury to the right of third person.

c) any injury suffered by agent due to theprincipals neglect or want of skill.

2) To compensate for revocation- Where agency iscreated for a fixed period and principal revokes

the agency before the expiry of the contractedperiod without sufficient cause, the principalmust compensate the agent for the same.

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RIGHTS OF PRINCIPAL

1) Right to revoke agency- Where agency is created for a fixed period the

principal may revoke the agency at any time before the expiry of thatperiod even without sufficient cause, provided he gives reasonable

notice and compensation to the agent

2) Right to repudiate- Where an agent deals on his own account in the

business of agency without obtaining the principals consent, the

principal has a right to repudiate the transaction.3) Right to secret profits of the agent Where an agent earns any secret

profit from the business of agency the principal is entitled to claim from

the agent any such benefit.

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TERMINATION OF AGENCY

1) COMPLETION OF AGENCY BUSINESS

2) DEATH OR INSAUITY OF PRINCIPAL OR AGENT

3) INSOLVENCY OF PRINCIPAL4) RENUNCIATION BY AGENT- NOTICE TO

PRINCIPAL

5) REVOCTION BY PRINCIPAL- NOTICE TO AGENT

COMPOSITION IF WITHOUT SUFFICIENT CAUSE.6) EXPIRY OF TIME- IF FOR FIXED TIME