LAW OF AGENCY
SUBMITTED TO : AANCHAL KUNDRA
ROLL NO : 2525118
SUBMITTED BY : ALKA
Meaning & Definition of Agency
• Section 182,
• “ An agent is a person employed to do any 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 person who delegates the authority is known as
principal.
• To whom the power is delegated is known as agent.
• The relationship that is created is known as agency.
• A person who act in place of another – Agent
• The person on whose behalf he acts - Principal
Features of the contract of agency
• Principal is answerable to third parties for the acts of agent .
• Consideration not necessary – Section 185 of the act clearly
lays down , “ No consideration is necessary to create an
agency”
• Principal must be competent to employ an agent – Only a
person who is competent to contract can employ an agent. (
Major, Sound Mind )
• Agent may not have contractual capacity –
A minor or a person of unsound mind may act as an agent &
bind the principal to the third persons.
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.
• General Agent – who is employed to do all such acts
which are connected with the business of trade of his
employer. If principal limits authority secretly, he himself
will be bound
• Universal Agent – is one who is employed to all such act
which a principal can lawfully do & can delegate. Agent
has unlimited authority.
• 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. Eg reserve price
3. Broker – is an agent appointed by the principal for the purpose
os 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. Commission Agent – is a mercantile agent who is
employed to buy & sell goods for his principal on best
possible terms. He transact in his own name. He is
entitled to commission. He may or may not have
possession.
5. 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.
6. 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
• By express agreement – authority is given to agent in written
or by words of mouth. He can bind the principal to the third
parties by his acts to the extent he is delegated with the
authority.
• By implied agreement
1. Agency by Estoppel – Where a person permit another to act
on his behalf. Principal is estopped from denying his agent’s
authority.
E.g. A tell B in the presence of P that A is the agent of P. P
does not contradict the statement. B enter into the contract
with P on the belief that A is P’s agent. In such case P
would be bound by the contract.
He is not the agent
He ceases to be an agent
2. Agency by holding out – Some positive conduct of the
principal indicates that a particular person is his agent.
P sends A to buy goods on credit from C.
A buys goods on credit for himself & refuses to pay. C sue P.
P cannot plead that A had no authority.
3. Agency by necessity – When an agency is created by the
circumstances. The impossibility of getting the instructions
from the principal is the basis of creation of agency by
necessity.
E.G. X sent some horses to Y through a railway company. But
Y did not take the delivery of the horses at the destination
with the result the railway company had to feed the horses.
Held, the railway co. was an agent of necessity & could
recover the amount spent on feeding the horses.
4. Agency by ratification – Ratification
means subsequent adoption or acceptance by a person of an
unauthorized act done by another on his behalf without any
authority.
X buys 5 bags of wheat on behalf of Y without his knowledge
or authority. Y would be bound by the contract, if he ratify or
accept the same.
It can be expressed or implied
Duties of an agent
• To follow principal’s directions – An agent must act
within the scope of the authority conferred on him. An
agent was instructed to insure goods. He failed to do so.
The goods were destroyed. He was held liable to the
extent of loss.
• To follow the customs in the absence of instructions – B,
a broker, in whose business, it is not the custom to sell on
credit, sell goods of A on credit to C, whose credit at the
time was very high. C, before payment, becomes
insolvent. B must make good the loss to A.
• To conduct business with reasonable care skill & diligence – A, an
agent for the sale of goods, having authority to sell on credit, sells
to B on credit, without making the proper & usual enquires as to
the solvency of B. B at the time of such sale, is insolvent. A must
make compensation of his principal in respect of any loss thereby
sustained.
• To keep & render accounts to principal when demanded.
• To communicate with principal.
• Not to deal on his own account – If an agent wants to deal on his
own account, he must seek the consent of the principal first & must
acquaint him with all the material facts. ( Purchase )
• Not to make secret profits ( Bribe )– Agency is a fudiciary relation.
• To pay sum received – he can deduct his remuneration & all
expenses incurred in conducting business.
Rights of an agent
• Right of retainer – The agent has a right to retain, out of
any sums received all money due to him in respect of
remuneration, advance made, expenses incurred in
conducting business.
• Right to receive remuneration if he has completed his
task. He is not entitled to any remuneration for part
transaction.
• Right of lien – he has right to exercise particular lien over
the goods, paper, property until the amount due to him
for commission, expenses has been paid.
Duties & Rights of the Principal
• To pay remuneration to agent
• To recover compensation for breach of duty by the agent
• To forfeit agent’s remuneration where he is guilty of
misconduct
• To receive any extra profit made by agent.
• To enforce the various duties of the agent.
• To receive all sums.
Termination of Agency
• By act of parties:
1. By agreement – mutual consent
2. By revocation of authority by the principal – The
principal can revoke the authority of an agent at
any time before the authority has been exercised as
to bind the principal.
3. By renunciation by the agent – by giving
reasonable notice.
• Termination by operation of law:
1. By performance of contract of agency.
2. By death of principal or agent.
3. By expiry of time – where agency is for fixed time period.
4. By insolvency of the principal.
5. By destruction of subject matter – agency was created to sell
a house & house destroys.
6. By becoming alien enemy – where principal & agent are from
different countries.
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