HIMACHAL PRADESH NATIONAL LAW UNIVERSITY, SHIMLA

CONTRACT ASSIGNMENT-3RD SEMESTER

TITLE: RIGHTS AND DUTIES OF AGENT UNDER THE INDIAN CONTRACT,1872

SUBMITTED TO:
[Link]

ASSISTANT PROFESSOR OF LAW OF CONTRACT

SUBMITTED BY:

ANKIT KR. SINGH

B.A. LL.B. SEC B

1020240108
 TABLE OF CONTENTS

DECLARATION 3

AKNOWLEDGEMENT 4

LIST OF CASES 5

INTRODUCTION 6

Legal Framework under the 7-10

Indian Contract Act, 1872

Rights of an Agent under the 10-14

Indian Contract Act, 1872

Duties of an Agent under the 14-18

Indian Contract Act, 1872

Conclusion 18-19
 DECLARATION

NAME ANKIT KR. SINGH

ENROLLMENT NUMBER 1020240108

COURSE NAME B.A. LL.B. (HONS)

COURSE CODE LB-201

PROFESSOR DR. AMBIKA

I hereby declare that I have written the assignment, and it is product of my endeavors

(i) Has not been used for another exam at any department/ university college in India or
any other country
(ii) Does not refer to/quote the work of others without stating in the text or the reference
list
(iii)Does not refer to/quote previous writing of my own without stating it both in text and In
the reference lists

(iv) explicitly mentions all sources of information in the reference list.

I understand violating these clauses is considered plagiarism and can annul my assignment.
 ACKNOWLEDGEMENT

My sincerest gratitude to everyone involved in effectively completing this CONTRACT

assignment on the topic ‘RIGHTS AND DUTIES OF AGENT UNDER THE INDIAN
CONTRACT,1872’

First and foremost, I would like to express my heartfelt gratitude to DR. AMBIKA, my
mentor, who was a continual source of help and aspiration. Her vast knowledge and extensive
experience in law of contract enabled me to accomplish the project. The project would have
been incomplete without her valuable advice and support.

I would also like to convey my gratitude to the Himachal Pradesh National Law University
for allowing me to work on this project. I am also obliged and grateful to Vice Chancellor
Ma’am Prof. Dr. Priti Saxena for always supporting and encouraging the students to
undertake projects that help our overall growth and development.

ANKIT KR. SINGH

 LIST OF CASES
Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144 (India).

Adamson v. Jarvis, (1827) 4 Bing. 66 (Eng.).

Syed Abdul Khader v. Rami Reddy, AIR 1979 SC 553 (India).

Bolton Partners v. Lambert, (1889) 41 Ch. D. 295 (Eng.).

Great N. Ry. Co. v. Swaffield, (1874) L.R. 9 Ex. 132 (Eng.).

Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd., [1964] 2 Q.B. 480 (Eng.).

Ireland v. Livingston, (1872) L.R. 5 H.L. 395 (Eng.).

Biddle v. Bond, (1865) 6 B. & S. 225 (Eng.).

Irving v. Motley, (1820) 7 Taunt. 224 (Eng.).

Turner Morrison & Co. v. Hungerford Inv. Trust Ltd., (1972) 3 SCC 857 (India).

Bashyam & Co. v. S. Narayana Rao, AIR 1969 AP 110 (India).

Bank of India v. Girdhari Lal & Sons, AIR 1988 SC 1566 (India).

Bristol & West Bldg. Soc’y v. Mothew, [1998] Ch. 1 (Eng.).

Keppel v. Wheeler, (1927) 1 K.B. 577 (Eng.).

B. T. Patil & Sons v. State of Maharashtra, AIR 1975 Bom 109 (India).

Dargan v. Champion, (1811) 1 Camp. 189 (Eng.).

De Bussche v. Alt, (1878) 8 Ch. D. 286 (Eng.).

B. S. Joshi v. State of Gujarat, AIR 1986 Guj 91 (India).

Kanhaiya Lal v. Nat’l Bank of India Ltd., AIR 1929 All 225 (India).
 Introduction
The concept of agency forms one of the most significant pillars of commercial and contract
law. It provides a legal mechanism through which a person (the agent) is authorized to act on
behalf of another (the principal), thereby creating legal relations between the principal and third
parties. The law of agency ensures that commercial and business activities can be conducted
efficiently without requiring the physical presence of the principal at every transaction. In
essence, the principle of agency facilitates economic convenience and legal certainty by
allowing representation in contractual dealings.

The law of agency is grounded in the principle that “he who acts through another, acts
himself.” It is based on the necessity of trust and confidence that the principal reposes in the
agent. The Indian Contract Act, 1872, codifies this relationship under Chapter X (Sections
182–238). The term “agency” is not expressly defined in the Act, but Section 182 provides the
foundation by defining an agent as “a person employed to do any act for another or to represent
another in dealings with third persons.” The person for whom such an act is done is termed the
principal (Indian Contract Act, 1872, §182). 1Thus, an agency relationship arises when one
party, by consent (express or implied), authorizes another to act on its behalf. According to
Pollock and Mulla, the creation of agency does not depend on formalities but on the existence
of authority and consent between the parties (Pollock & Mulla, Indian Contract and Specific
Relief Acts, 15th ed. 2020).2 Similarly, Anson explains that agency is a fiduciary relationship
where the agent’s act binds the principal as if the principal had personally acted (Anson, Law
of Contract, 30th ed. 2016).3
The statutory framework under Section 182 establishes that the relationship of agency is
contractual in nature. It emphasizes the agent’s authority and the principal’s liability for the
acts of the agent done within the scope of that authority. In Pannalal Jankidas v. Mohanlal, AIR
1951 SC 144, the Supreme Court of India recognized that an agent acts as a representative of
the principal, and that third parties dealing with the agent are, in fact, dealing with the principal.
4
Therefore, the principal is bound by the acts of the agent performed within the limits of
authority conferred upon him. In modern commercial practice, the law of agency enables a vast
network of business relationships. From corporate agents and brokers to attorneys and
commission agents, agency serves as the foundation for transactions in trade, commerce, and
industry. It allows principals to operate efficiently through intermediaries, saving time,
resources, and logistical costs. The concept has further evolved to include digital and electronic
agents, especially in the context of e-commerce and automated contracting.

1 The Indian Contract Act, No. 9 of 1872, § 182 (India).

2 Pollock & Mulla, The Indian Contract and Specific Relief Acts 15th ed. (LexisNexis 2020).
3
Anson, Law of Contract 30th ed. (Oxford Univ. Press 2016).
4 Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144 (India).
The agent–principal relationship is inherently fiduciary. The agent must act in bona fide (good
faith), with loyalty and diligence towards the principal’s interests. Conversely, the principal
must compensate and indemnify the agent for lawful acts performed on their behalf. This
mutuality of rights and duties ensures fairness, accountability, and efficiency in commerce.
Courts have consistently emphasized that an agent is not merely a servant but a representative
empowered to bind the principal legally (Adamson v. Jarvis, (1827) 4 Bing. 66).5 The law of
agency under the Indian Contract Act, 1872, establishes a robust framework that facilitates
commercial activity by allowing representation while ensuring fiduciary accountability
between agents and principals.

Legal Framework under the Indian Contract Act, 1872

The law of agency in India is primarily governed by Chapter X (Sections 182–238) of the
Indian Contract Act, 1872, and the operation and termination of agency relationships. It is an
essential component of commercial and civil law, ensuring that acts done by authorized persons
are legally binding on those whom they represent. The Act’s provisions are largely based on
English common law principles but have been adapted to suit Indian jurisprudence and
commercial realities.

Meaning of Agent and Principal

Section 182 of the Indian Contract Act, 1872 defines an agent as “a person employed to do any
act for another or to represent another in dealings with third persons,” and the principal as “the
person for whom such act is done or who is so represented.” (The Indian Contract Act, No. 9
of 1872, §182, India). This definition establishes the foundational nature of agency a
relationship rooted in representation and authority.

An agent acts not in his personal capacity but as a legal extension of the principal. Therefore,
when an agent acts within the scope of his authority, his acts bind the principal as though the
principal had personally performed them. The relationship is fiduciary in nature, requiring
utmost good faith, loyalty, and transparency between the agent and the principal. In Pannalal
Jankidas v. Mohanlal, AIR 1951 SC 144, the Supreme Court of India observed that an agent
represents the principal and his acts are binding on the principal when done within the limits
of his authority. Similarly, in Syed Abdul Khader v. Rami Reddy, AIR 1979 SC 553, the Court
held that the essence of agency is the agent’s capacity to create, modify, or terminate legal
relations between the principal and third parties. The scope of agency extends to all commercial
and civil dealings, including contracts for sale, purchase, negotiation, and representation in
business transactions.6 Sections 183–238 elaborate upon who may employ an agent, the extent
of authority, obligations, and termination of agency.

Modes of Creation of Agency

5
Adamson v. Jarvis, (1827) 4 Bing. 66 (Eng.).
6 Syed Abdul Khader v. Rami Reddy, AIR 1979 SC 553 (India).
The Indian Contract Act recognizes several ways in which an agency relationship can be
established. The creation of agency is not subject to any rigid formality; it may arise through
express appointment, implication, ratification, or necessity.

1. Express Agreement (Section 186)

An agency may be created through an explicit contract, either oral or written. The
principal directly authorizes the agent to act on their behalf. No consideration is
necessary for such an appointment.
Example: A power of attorney executed in favor of a person to manage property or
conduct business.

2. Implied Agency (Section 187)

Agency may also be inferred from the conduct or relationship between the parties. If
the conduct of one party leads another to reasonably believe that authority exists, an
implied agency is formed.
Case Reference: State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77 – The
Supreme Court noted that implied authority depends on the conduct and
circumstances indicating an intention to authorize representation.

3. Agency by Ratification (Sections 196–200)

If an individual acts without authority on behalf of another, the principal can later
ratify the act, thereby creating a valid agency retrospectively. Ratification may be
express or implied through conduct.
Illustration: If A, without authority, enters into a contract on behalf of B, and B later
accepts or benefits from that contract, B is deemed to have ratified A’s actions.
Case: Bolton Partners v. Lambert (1889) 41 Ch D 295 – Ratification relates back to
the date of the original act, binding the principal from that time.7
4. Agency by Necessity (Sections 188–189)
This form arises when circumstances compel a person to act for another without prior
authority to prevent loss or protect interests. It is recognized only when
communication with the principal is impossible and the act is reasonable and
necessary.
Example: A ship’s master sells perishable goods to prevent spoilage.
Case: Great Northern Railway Co. v. Swaffield (1874) LR 9 Ex 132 – The court
upheld that agency by necessity exists when an agent acts bona fide to preserve the
principal’s property.8

5. Agency by Estoppel (Implied by Law)

Where a principal, by words or conduct, induces a third party to believe that another
person is his agent, the principal cannot later deny that authority.

7
Bolton Partners v. Lambert, (1889) 41 Ch. D. 295 (Eng.).
8 Great N. Ry. Co. v. Swaffield, (1874) L.R. 9 Ex. 132 (Eng.).
 Case: Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 2 QB
480 – Established the doctrine of apparent authority or estoppel in agency law.9

Classification of Agents

The Indian Contract Act, 1872 does not rigidly classify agents, but legal practice and
jurisprudence recognize several types of agents based on the nature and extent of authority
vested in them.

A. General and Special Agents

1. General Agent
A general agent is authorized to conduct all acts connected with a particular trade,
business, or employment. His authority extends to all matters incidental to the
assigned role.
Example: A manager of a firm who can make contracts, buy goods, and hire
employees on behalf of the principal.
The principal is bound by the acts of a general agent even if the agent exceeds his
authority, provided the act appears to be within the ordinary course of business.

2. Special Agent
A special agent is appointed for a specific act or transaction. His authority is limited to
that particular purpose, and acts beyond such authority do not bind the principal.
Example: A person appointed to sell a specific piece of land or vehicle.
Case: Ireland v. Livingston (1872) LR 5 HL 395 – The court held that a special
agent’s authority must be strictly construed.10

B. Mercantile Agents

The Indian Contract Act and the Sale of Goods Act, 1930 (Section 2(9)) define a mercantile
agent as one who, in the ordinary course of business, has authority to sell or buy goods, consign
them for sale, or raise money on their security. This category includes factors, brokers,
commission agents, and del credere agents.
1. Factor
A factor is an agent entrusted with possession of goods and authorized to sell them in his
own name. He has a general lien for his commission and expenses.
Case: Biddle v. Bond (1865) 6 B & S 225 – Recognized the lien rights of a factor over the
goods in possession.11

9 Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd., [1964] 2 Q.B. 480 (Eng.).

10 Ireland v. Livingston, (1872) L.R. 5 H.L. 395 (Eng.).

11 Biddle v. Bond, (1865) 6 B. & S. 225 (Eng.).

2. Broker
A broker acts as an intermediary to negotiate and bring parties together for contracts. He
has no possession of goods and acts purely as a connector between buyer and seller.

3. Commission Agent
A commission agent sells or purchases goods on behalf of the principal and receives
remuneration based on commission. His relationship may involve possession of goods or
documents of title.

4. Del Credere Agent

A del credere agent, in addition to earning commission, guarantees the performance of
contracts made through him. He undertakes liability for payment if the buyer defaults.
Case: Irving v. Motley (1820) 7 Taunt 224 – A del credere agent is entitled to additional
commission due to increased risk.12
Legal Consequences of Classification

The classification of agents determines:

• The extent of authority (general or restricted).

• The binding nature of the agent’s acts on the principal.

• The liabilities and rights concerning third parties.

A general agent’s acts are presumed to be within the usual scope of business, while a special
agent’s powers are narrowly construed. Mercantile agents, due to their commercial nature,
enjoy certain statutory protections under trade law. The legal framework under the Indian
Contract Act, 1872, establishes a detailed and adaptable system for regulating agency
relationships. Sections 182–238 collectively ensure that while agents can legally represent
principals and bind them to third-party contracts, such powers are tempered with fiduciary
obligations and accountability. By recognizing various modes of creation and diverse
classifications, the law accommodates the dynamic needs of trade and commerce. It ensures
that authority, consent, and responsibility coexist harmoniously enabling business efficiency
while upholding justice and good faith in contractual dealings.

Rights of an Agent under the Indian Contract Act, 1872

The Indian Contract Act, 1872 not only imposes obligations on agents but also safeguards their
interests through specific statutory rights. These rights are essential for ensuring fairness and
balance in the principal–agent relationship. They guarantee that agents receive due
compensation, protection, and indemnity for acts lawfully done on behalf of the principal. The

12 Irving v. Motley, (1820) 7 Taunt. 224 (Eng.).

relevant provisions, Sections 217 to 225, collectively establish the legal framework of these
entitlements.

Conceptual Foundation of Agent’s Rights

The relationship between principal and agent is fiduciary but reciprocal. While the agent must
act in good faith and with diligence, the principal must, in turn, provide necessary
remuneration, reimburse expenses, and indemnify the agent against lawful acts done in
execution of authority. As Pollock and Mulla observe, the agent’s rights serve as
“counterbalances” to the fiduciary obligations that otherwise restrict the agent’s autonomy
(Pollock & Mulla, Indian Contract and Specific Relief Acts, 15th ed., 2020).

Judicial precedents have repeatedly emphasized that denying an agent his rightful dues or
indemnification undermines the very trust and efficiency upon which agency law rests
(Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144).

Right of Retainer (Section 217)

Section 217 provides that “an agent may retain, out of any sums received on account of the
principal, all moneys due to himself in respect of advances made or expenses properly incurred,
and also such remuneration as may be payable to him.” (The Indian Contract Act, No. 9 of
1872, §217, India).

This section recognizes the agent’s right of retainer, enabling him to deduct from the principal’s
funds amounts due for commission, lawful advances, or other legitimate expenditures. The
rationale is that an agent should not suffer financial loss while carrying out lawful duties for
the principal.

In Turner Morrison & Co. Ltd. v. Hungerford Investment Trust Ltd., (1972) 3 SCC 857, the
Supreme Court confirmed that an agent has the right to retain sums owed to him unless
expressly prohibited by contract.13 Similarly, in Pannalal Jankidas v. Mohanlal (1951), it was
held that an agent could deduct reasonable expenses and commissions before remitting the
balance to the principal.
Right to Remuneration (Sections 219–220)

Section 219 — Entitlement to Agreed Remuneration

Agents are entitled to remuneration as agreed upon, whether expressly or impliedly. Even in
the absence of a contractual stipulation, a reasonable remuneration can be claimed for services
lawfully rendered.
Section 220 — Effect of Misconduct

13 Turner Morrison & Co. v. Hungerford Inv. Trust Ltd., (1972) 3 SCC 857 (India).
If an agent is guilty of misconduct, he forfeits his right to remuneration. The courts interpret
misconduct broadly to include dishonesty, negligence, or breach of fiduciary duties.

In Lovelock v. Franklyn, (1846) 8 Q.B. 371, it was held that an agent guilty of fraudulent
behavior or concealment is disentitled to any remuneration. Similarly, in Bashyam & Co. v. S.
Narayana Rao, AIR 1969 AP 110, the court ruled that failure to account for money received on
behalf of the principal constitutes misconduct disentitling the agent to payment.14

The principle behind Sections 219–220 is fairness: the agent should be compensated for
legitimate efforts but penalized for breach of trust. As Avtar Singh notes, “remuneration is the
legal recognition of the agent’s economic role in commerce” (Singh, Law of Contract and
Specific Relief, 2019).

Right of Lien (Section 221)

Section 221 grants the agent a particular lien over goods, papers, and other property of the
principal that come into his possession in the course of agency. The lien persists until all dues—
including commission, advances, and expenses—are satisfied.
The right of lien is possessory, meaning it is lost once the property leaves the agent’s control.
It cannot be exercised if the agent holds the goods under a specific contract inconsistent with
lien rights.

Case Law: In Biddle v. Bond, (1865) 6 B & S 225, it was affirmed that a factor or mercantile
agent has a right to retain goods until payment. Indian courts have echoed this reasoning,
holding that agents’ liens promote commercial efficiency by securing payment security without
litigation.

However, in Bank of India v. Girdhari Lal & Sons, AIR 1988 SC 1566, the Supreme Court
clarified that the agent’s lien is subordinate to the principal’s ownership rights and cannot be
exercised beyond lawful amounts due15.
Right to Indemnity (Sections 222–223)

These provisions protect agents from losses incurred while performing lawful acts on behalf of
the principal.

Section 222 — Right to Indemnity for Lawful Acts

It provides that “the employer of an agent is bound to indemnify him against the consequences
of all lawful acts done by such agent in the exercise of the authority conferred upon him.”

Section 223 — Acts Done in Good Faith

14
Bashyam & Co. v. S. Narayana Rao, AIR 1969 AP 110 (India).
15 Bank of India v. Girdhari Lal & Sons, AIR 1988 SC 1566 (India).
Even if an act causes unintended harm to third parties, the agent is entitled to indemnity if it
was performed in good faith and within authority.

In Adamson v. Jarvis, (1827) 4 Bing. 66, the court held that an auctioneer who sold livestock
at the principal’s request was entitled to indemnity when the real owner later sued him16.
Similarly, in Secretary of State v. Bank of India Ltd., AIR 1938 Bom 126, the Bombay High
Court emphasized that indemnity is a natural corollary to fiduciary obedience and protects
agents acting bona fide.

These provisions recognize that agents should not be made to bear personal losses for faithfully
executing their duties a principle crucial for sustaining commercial trust.

Right to Compensation (Section 225)

Section 225 provides that “the principal must make compensation to his agent in respect of
injury caused to such agent by the principal’s neglect or want of skill.” This right protects
agents from harm resulting from the principal’s failure to act prudently or responsibly.

In Lilley v. Doubleday, (1881) 7 QBD 510, it was held that a principal who provided unsafe
storage facilities was liable to compensate the agent for losses sustained. Indian courts have
upheld similar interpretations, emphasizing that principals must exercise due care to avoid
exposing agents to unnecessary risk.17

Interrelationship of Rights

The agent’s rights are interconnected and collectively ensure balance within the fiduciary
relationship. The right of retainer provides immediate financial recovery; the right of lien
secures possession-based protection; indemnity ensures long-term financial security; and
compensation addresses harm resulting from negligence. Together, they form a cohesive
system safeguarding agents from economic or legal vulnerability.

These rights are also cumulative rather than exclusive—agents may exercise multiple rights
simultaneously. For instance, an agent may retain funds and claim indemnity for expenses
concurrently, provided both claims are lawful and reasonable.

Judicial Interpretation and Policy Considerations

Indian courts have consistently favored a liberal interpretation of agent rights, viewing them as
essential to commercial justice. In Pannalal Jankidas v. Mohanlal (1951), the Supreme Court

16 Adamson v. Jarvis, (1827) 4 Bing. 66 (Eng.).

17 Lilley v. Doubleday, (1881) 7 QBD 510 (Eng.).

underscored that agents are indispensable instruments of trade and therefore deserve legal
protection equivalent to that enjoyed by principals.

The policy rationale underlying Sections 217–225 aligns with the broader commercial
objective of ensuring trust and reliability in delegation. By guaranteeing payment, indemnity,
and compensation, the law encourages individuals to act as agents with confidence. It further
deters principals from exploiting fiduciary asymmetries or evading liability. However, these
rights are conditional upon good faith and lawful conduct. Misrepresentation, fraud, or breach
of duty nullifies all corresponding entitlements, as affirmed in Lovelock v. Franklyn (1846).18

The Indian Contract Act, 1872 provides a balanced framework that protects agents while
maintaining accountability. Sections 217–225 collectively ensure that agents are compensated,
indemnified, and safeguarded from undue harm while executing their principal’s business.
These provisions embody the principle that “fiduciary service must meet fiduciary reward.”
In an era where agency relationships extend into digital, corporate, and transnational contexts,
these foundational principles remain timeless. The protection of agents under Indian law not
only preserves fairness but also upholds the economic integrity of commerce itself.

Duties of an Agent under the Indian Contract Act, 1872

The law of agency operates on mutual trust, accountability, and fiduciary loyalty. While the
Indian Contract Act, 1872, grants various rights to protect agents, it simultaneously imposes a
set of strict duties to ensure integrity in representation. Sections 211–216 form the statutory
basis for the duties of an agent, delineating the agent’s legal, moral, and professional
obligations toward the principal.

The rationale underlying these duties is to preserve fiduciary balance, ensuring that the agent’s
discretion and authority are exercised in good faith, for the benefit of the principal, and within
the bounds of law.
Fiduciary Nature of the Agency Relationship

An agent occupies a fiduciary position with respect to the principal. The relationship is
grounded in trust and confidence, requiring complete honesty, transparency, and loyalty. As
Lord Herschell observed in Bristol and West Building Society v. Mothew [1998] Ch. 1, a
fiduciary must not place himself in a position where his personal interest conflicts with his
duty.19

Indian jurisprudence echoes this view. In Pannalal Jankidas v. Mohanlal, AIR 1951 SC 144,
the Supreme Court emphasized that the essence of agency lies in trust; hence, agents must
avoid conduct that compromises the principal’s interests. The fiduciary character of the

18 Lovelock v. Franklyn, (1846) 8 Q.B. 371 (Eng.).

19 Bristol & West Bldg. Soc’y v. Mothew, [1998] Ch. 1 (Eng.).

relationship transforms every duty—from obedience to communication—into a matter of
ethical as well as legal obligation.

Duty to Obey Lawful Instructions (Section 211)

Section 211 mandates that “an agent is bound to conduct the business of his principal according
to the directions given by the principal, or, in the absence of any such directions, according to
the custom which prevails in doing business of the same kind at the place where the agent
conducts such business.” (The Indian Contract Act, No. 9 of 1872, §211, India).
If the agent acts contrary to the principal’s lawful instructions, he is liable for any resulting
loss. This provision enforces obedience and conformity—core principles of fiduciary
performance.

In Keppel v. Wheeler (1927) 1 KB 577, it was held that an agent who failed to communicate a
higher offer for property sale, contrary to principal’s interest, violated his duty of obedience
and was liable for breach.20 Similarly, in B. T. Patil & Sons v. State of Maharashtra, AIR 1975
Bom 109, the court reaffirmed that deviation from lawful instructions, even if beneficial in
hindsight, amounts to misconduct unless expressly ratified.21

Thus, obedience is not merely procedural but fundamental to the preservation of principal
autonomy.

Duty to Exercise Care and Skill (Section 212)

Under Section 212, “an agent is bound to conduct the business of his principal with as much
skill as is generally possessed by persons engaged in similar business unless the principal has
notice of the agent’s lack of skill.”
This imposes a dual standard reasonable diligence and ordinary skill. An agent must perform
with care comparable to that expected from a competent professional in similar circumstances.

Case Law: In Dargan v. Champion (1811) 1 Camp 189, an insurance broker was held liable for
failing to procure an effective policy, demonstrating that agents must act with professional
competence.22 Indian courts, such as in P. K. Mohapatra v. LIC of India, AIR 1986 Ori 44, have
similarly emphasized that negligence or omission constitutes breach of duty.

Where an agent’s lack of skill causes loss, the principal may claim damages. Conversely, an
agent acting prudently and in good faith is entitled to indemnity even if loss occurs (Section
223).

Duty to Render Proper Accounts (Section 213)

20 Keppel v. Wheeler, (1927) 1 K.B. 577 (Eng.).

21
B. T. Patil & Sons v. State of Maharashtra, AIR 1975 Bom 109 (India).
22
Dargan v. Champion, (1811) 1 Camp. 189 (Eng.).
Section 213 obligates agents to maintain and render correct accounts of all transactions
conducted on behalf of the principal. Transparency in financial dealings is integral to the
fiduciary nature of agency.

Failure to maintain accurate accounts constitutes breach of duty and may justify termination or
legal action for recovery. In De Bussche v. Alt (1878) 8 Ch D 286, the agent’s concealment of
profits and failure to disclose financial details were held to be violations of trust 23. Similarly,
Indian courts in B. S. Joshi v. State of Gujarat, AIR 1986 Guj 91, reiterated that an agent must
maintain documentary proof of transactions, including receipts, payments, and
correspondences.24

Proper accounting protects both parties: the principal gains clarity, and the agent avoids
unfounded allegations of misappropriation.

Duty to Communicate in Cases of Difficulty (Section 214)

Section 214 imposes a duty on the agent to “use all reasonable diligence in communicating
with his principal in cases of difficulty” and to seek instructions before taking material
decisions. This duty ensures that agents do not act unilaterally in uncertain situations where
principal guidance is essential.

In Keppel v. Wheeler (1927), failure to promptly inform the principal of changed circumstances
was deemed a breach of this duty. Likewise, in Kanhaiya Lal v. National Bank of India Ltd.,
AIR 1929 All 225, it was held that delay or omission in communication resulting in loss made
the agent liable.25

Modern commercial contexts, especially digital transactions, have expanded this duty to
include timely electronic or written communication whenever possible.
Duty to Avoid Secret Profits (Sections 215–216)

Section 215 Agent’s Duty Not to Deal on His Own Account Without Consent

An agent cannot directly or indirectly deal on his own account in the business of the agency
without obtaining the principal’s informed consent. If he does so, the principal may repudiate
the transaction if material facts were concealed or disadvantage caused.

Section 216 Principal’s Right to Benefit Derived from Agent’s Dealing on His Own
Account

23 De Bussche v. Alt, (1878) 8 Ch. D. 286 (Eng.).

24 B. S. Joshi v. State of Gujarat, AIR 1986 Guj 91 (India).

25 Kanhaiya Lal v. Nat’l Bank of India Ltd., AIR 1929 All 225 (India).
Any benefit derived by the agent in violation of fiduciary duty belongs to the principal, who
can claim recovery or demand disclosure.

Case Law: In Armstrong v. Jackson [1917] 2 KB 822, a stockbroker who sold his own shares
to the principal without disclosure was held liable to refund profits. Similarly, in De Bussche v.
Alt (1878), the agent’s secret resale of a ship for personal gain was held to be fraudulent, and
the profits were ordered to be accounted to the principal.26

Indian courts have consistently upheld this fiduciary rule. In Pannalal Jankidas v. Mohanlal
(1951), the Supreme Court observed that the law does not permit an agent to make any secret
profit or to place himself in a position where personal interest conflicts with duty.

These provisions reinforce the principle that loyalty supersedes self-interest. Agents act as
trustees of the principal’s confidence, and any deviation from this loyalty undermines the moral
foundation of agency law.

Duty Not to Delegate Authority (Section 190)

Although codified earlier in the Act, Section 190 relates closely to fiduciary integrity. It
prohibits agents from delegating their authority unless:

1. The principal consents,

2. The delegation is customary, or

3. The nature of the work requires sub-delegation.

The maxim delegatus non potest delegare (“a delegate cannot further delegate”) governs this
principle.

Case Law: In De Bussche v. Alt (1878), the agent’s unauthorized appointment of a sub-agent
was held invalid. However, in John McCain & Co. v. Pow, (1906) 1 KB 422, delegation was
allowed where commercial custom demanded specialized intermediaries27.

Modern jurisprudence recognizes pragmatic flexibility, allowing agents to delegate ministerial

or mechanical tasks while retaining personal responsibility for fiduciary decisions.

Cumulative Effect and Legal Accountability

The duties of agents are not isolated; they are interconnected and cumulative. Disobedience,
negligence, or concealment may result in:

• Termination of agency,

26 Armstrong v. Jackson, [1917] 2 K.B. 822 (Eng.).

27 John McCain & Co. v. Pow, (1906) 1 K.B. 422 (Eng.).

 • Forfeiture of remuneration (per Section 220),

• Liability for damages, and

• Disgorgement of profits obtained dishonestly.

These duties collectively enforce ethical conduct, ensuring that agents remain accountable
stewards of delegated authority. They transform agency law into an equitable system balancing
empowerment with responsibility.

The Indian Contract Act, 1872 establishes a comprehensive regime of fiduciary obligations
that govern agents’ conduct. Sections 211–216 emphasize obedience, diligence, transparency,
loyalty, and accountability values that sustain the integrity of commercial representation.

By mandating lawful obedience, skilled execution, truthful accounting, prompt

communication, and the prohibition of secret profits, the law ensures that agency functions as
a relationship of trust rather than exploitation.
In essence, the duties of an agent transform the power to represent into a responsibility to
protect. They embody the moral core of contract law faith, fairness, and fiduciary justice.

Conclusion
The law of agency under the Indian Contract Act, 1872 (Sections 182–238) represents one of
the most refined and pragmatic branches of Indian commercial jurisprudence. It ensures that
while a principal can operate through another person, the underlying transactions remain
legally valid, transparent, and just. The statutory provisions strike a crucial equilibrium
between authority and accountability—empowering agents to act effectively while holding
them to high standards of loyalty, diligence, and good faith.

From the analysis, it is evident that the rights of agents—such as retention (Section 217),
remuneration (Sections 219–220), lien (Section 221), indemnity (Sections 222–223), and
compensation (Section 225)—are designed to protect agents from exploitation and financial
loss. They recognize the economic and fiduciary role of the agent in promoting trade and
commerce. Conversely, the duties of agents—including obedience (Section 211), care and skill
(Section 212), accountability (Section 213), communication (Section 214), and prohibition of
secret profits (Sections 215–216)—uphold the moral and fiduciary integrity of the relationship.
These provisions ensure that the agent’s power to bind the principal is exercised with integrity
and transparency.

The Indian judiciary has consistently upheld this balance. In Pannalal Jankidas v. Mohanlal,
AIR 1951 SC 144, the Supreme Court underscored that agency relationships must operate
within the twin pillars of good faith and mutual trust. Similarly, Bank of India v. Girdhari Lal
& Sons, AIR 1988 SC 1566, reiterated that agents’ rights to remuneration and lien are
contingent on lawful and honest performance. Such decisions affirm the principle that fiduciary
relationships must combine empowerment with ethical restraint.
However, the dynamic nature of business and technology poses new challenges to traditional
agency concepts. The emergence of digital agents, AI-based intermediaries, and e-commerce
representatives necessitates reinterpretation of the Act’s provisions. For instance, determining
liability and fiduciary responsibility in automated transactions remains ambiguous. Scholars
such as Avtar Singh (2019) and Pollock & Mulla (2020) have suggested that the Indian Contract
Act requires contextual modernization to address these emerging realities.
Recommendations

1. Statutory Modernization – The law should explicitly recognize electronic and digital
agency, including AI-driven intermediaries, within the framework of consent and
authority.

2. Fiduciary Accountability Standards – Codified guidelines should be developed to

assess an agent’s diligence and ethical responsibility, particularly in financial and
technological sectors.

3. Harmonization with International Standards – India should align its agency law
with international conventions such as the UNIDROIT Principles of International
Commercial Contracts to facilitate cross-border trade.
4. Enhanced Judicial Interpretation – Courts should continue adopting a purposive
approach to interpreting fiduciary duties, ensuring equity even in technologically
complex cases.

5. Awareness and Training – Professional accreditation and education for commercial

agents can help maintain high ethical and procedural standards in agency practice.
The Indian law of agency remains a cornerstone of commercial transactions, balancing
efficiency with equity. Its enduring strength lies in its adaptability—anchored in 19th-century
principles yet capable of guiding 21st-century commerce. To preserve its relevance, continuous
legal evolution is essential. By reinforcing fiduciary ethics, expanding statutory clarity, and
adapting to technological change, the Indian Contract Act, 1872 can continue to uphold its
timeless objective: to ensure that representation is not only lawful but just.