Contract of Agency
(Section 182 –238)
By:-
Lakshay (3055)
Contract of
Agency
Introductio
In
n India, the agent and principle share a relationship that is
contractual in nature, and therefore it is governed by the terms and
conditions of the contract between them. Chapter X of the Indian
Contract Act, 1872 provides the basic structure of rules and
regulations that basically govern the performance and formation of
any type of contract including the agency contract.
Definition
:
Agency can be defined as the relationship between
two persons, wherein a person has the authority to act
on behalf of another, bind him/her into a legal
relationship with the third party. There are two parties
in a contract of agency – principal and agent.
Who is a Principal?
Any person who employs another person to perform an act
and who is being represented by another person in dealing
with the third party is the Principal.
The person acting on behalf of the other is called
the person from whom the agent derives authority
an agent, and
to act is called principal.
RIGHTS OF THE
1. The principal is entitled PRINCIPAL
to enforce all the duties of the agent. This is because agent’s
duties are the principal’s right.
2. He may repudiate the transaction if it shows either that any material fact has been
dishonestly concealed from him by the agent or that the dealings of the agent have been
disadvantageous to him (Sec. 215)
3. If an agent, without the knowledge of the principal, deals in the business of the agency
on his own account instead of an account of his principal, the principal is entitled to claim
from the agent any benefit which may have resulted to him from the transaction. (Sec.
216)
4. He is entitled to compensation for any loss or any profit accruing, owing to departure
from instructions
(Sec. 211)
5. The principal is entitled to demand proper accounts from the agent. (Sec. 213)
6. The principal is entitled to compensation in respect of the direct consequences of the
agent’s negligence, want of skill or misconduct. (Sec. 212)
Who is an Agent?
A person employed by the Principal, to act on his
behalf, represent
him in the dealings with the third party and also to
bring him into a contractual relationship with the third
party, is called an Agent.
CREATION OF AN
AGENCY
1. By express or implied contract- A principal may implicitly or expressly
employ an agent. The appointment may be expressed in writing or it
may be oral.
2. By conduct of party or situation– E.g. estoppel- Whereby a person
allows another to act for him to such an extent that a third party
3. By ratification-
reasonably believesassent isagency
that an given either to an act
relationship done
exists by someone
between the two.
who had no previous authority to act or to an act that exceeded the
authority granted to an agent. 4. By Necessity- a person acts for
another in an emergency situation without express authority to do so.
DUTIES OF AN
AGENT
Duty to follow instructions
Duty of reasonable care and skill
Duty to Render Proper Accounts
Duty to communicate with Principal
Duty not to Deal on his own account
Duty not to make secret Profits
Duty not to delegate (Section 190)
RIGHTS OF AN
1. Right of retainer AGENT
- an agent has the right to hold his principal’s money till the
time his claims, if any, of remuneration or advances are made or expenses
occurred during his ordinary course of business as agency are paid.
2. Right to remuneration – an agent is entitled to get an agreed remuneration as
per the contract. If nothing is mentioned in the contract about remuneration,
then he is entitled to a reasonable remuneration. But an agent is not entitled for
any remuneration if he is guilty of misconduct in theusiness of agency.
3. Right of lien – an agent has the right to hold back or retain goods or other
property of the principal received by him, till the time his dues or other
payments are made.
4.Right to indemnity
losses incurred – an agent
while conducting hishas the of
course right to indemnity extending to all
expenses
business asand
agency.
5. Right to compensation - an agent has the right to be compensated for any
injury suffered by him due to the negligence of the principal or lack of skill.
LIABILITY OF THE PRINCIPAL FOR THE
ACTS OF THE AGENT TO THE THIRD
PARTIES
The position of the principal in relation to third parties
under contracts made by agent may be discussed under
the following heads:
1.Acting for a named principal.
2.Acting for an unnamed principal.
3.Acting for an undisclosed principal.
1. AGENT ACTING FOR A NAMED
PRINCIPAL
1. Acts of an Agent within the Scope of his
Authority
3.Where the work can be separated
2. Acts of an Agent Exceeding his Authority
4.Where the work cannot be separated
5.Notice Given to Agent
6.Liability by Estoppel
7.Liability for Misrepresentation or Fraud
2. AGENT ACTING FOR A UNNAMED
PRINCIPAL
When an agent contracts, as an agent for a principal but does not
disclose his name, the principal is liable for the contract of the agent.
But the unnamed principal should be in existence at the time of the
contract and the acts must be within the scope of agent’s authority.
Example: A appointed B as his agent to purchase some goods. B
entered into an agreement with C for purchasing those goods. B signed
the agreement as a broker “to my principal” but did not disclose the
name of the principal. Here, B is not personally liable because he
contracted in the capacity of an agent.
3. AGENT ACTING FOR AN UNDISCLOSED PRINCIPAL
1. Rights and Liabilities of Agent
2. Rights and Liabilities of Third
Party
3. Rights and Liabilities of
Principal
DISTINCTION BETWEEN
AN AGENT AND
BAILEE
Agent Baile
An agent may not have possession of any e has possession of
A bailee
goods of the goods or property of the principal.
bailor.
An agent has authority to contract on behalf A bailee does not have
such authority. of his principal
DISTINCTION BETWEEN
AGENT AND A SUB-
AN
AGENT
Agen Sub-agent
t
An agent is appointed by a principal and is A sub-agent is appointed by
under
an hisand
agent control.
as such is under the control of the
An agent acts under the agent.
principal. A sub-agent acts under an agent.
A privity of contract exists between a No privity of contract
exists between a
principalandanage principalandasub-
An
nt. agent can ask for remuneration from the A sub-agent cannot ask for
agent.
principal.
remuneration from the principal.
TERMINATION OF
❗ By the acts of parties
AGENCY ‼️Termination of Agency by
1. Mutual Agreement Operation of Law
2. Revocation of the Agent’s 1. Performance of the
Authority by the Principal Contract 2. Expiry of Time
3. Death or Insanity of
3. Revocation by the Agent
Either Party
4. Insolvency of the
Principal
5. Destruction of Subject-
Matter 6. Principal
becoming an Alien Enemy
7. Dissolution of a
Company
