law of agencies

8/7/2019 Law of Agencies

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Principal

The party who employsanother person to act on his or

her behalf.



Who can employ an agent ????

A person who is the age of majority according tothe law to which he is subject, and who is of

sound mind , may employ an agent .



Essentials of Contract of Agency

1. Contract: There must be relationship through an agreement

under which the agent represents his principal. The contract maybe express or implied.

2. Authority: The agent should be appointed by the principaland confer authority to act for him.

3. Contractual Capacity: Principal must be competent i.e., aminor or person of unsound mind cannot appoint an agent,otherwise the agent shall be personally liable.

4. Liability: Authority conferred should be such as will make theprincipal answerable to third parties.

5. Object of appointment: Is to establish relationshipbetween principal & his parties

6. Confidence: Relationship of agency is based on confidencebetween principal & the agent

7. Consideration: No consideration is necessary to create anagency.

8. Others: Other conditions of a valid contract like free consent &legality of object also necessary for agency



Classification of agents

� Special Agents who is employed to do someparticular act or represent his principal insome particular transaction. As soon as the

act is performed the authority of agent comesto an end. E.g. An agent engaged to sell ahouse.



� Universal Agent is one who is employed toall such act which a principal can lawfully do &

can delegate. Agent has unlimited authority.(Exclusive Rights)



� FROM THE POINT OF VIEW OF NATURE OF WORK TO BE PERFORMED:

1. Factors is a mercantile agent to whom thepossession of goods are given for the purposeof selling them. He usually sells the goods inown name. He can exercise a general right of lien on the goods delivered to him for balanceof 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.

3. Broker is an agent appointed by the

principal for the purpose of selling or buyinggoods on his behalf. He do not have

possession of goods nor he can contract in his

own name. He bring seller & buyer together tobargain. He gets commission ( brokerage ).



4. Del credere Agent is one who guarantees to

his principal, the performance of the financialobligation by party with whom he enters intoa contract on principal behalf, in considerationof an extra commission. He becomes surety &become liable on the default of third party.

5. Banker act as a mercantile agent on behalf of his customer when he collects cheques,

drafts, bills & pay insurance premium & buy orsell securities.



Creation of Agency

In any one of th

e following ways

:a. By Express Agreement

b. By Implied Agreement

c. By Ratification

d. By Operation of Law



Creation of Agency

In any one of the following ways: a) By Express Agreement (S.187):

� Principal appoints agent either by words spoken or written

� A person gives Power of Attorney (general or special)-express deed is created

� Agents to execute deeds, grant/surrender leases, sign prospectsof a co. to act as proxy for a shareholder must be appointed by awritten deed



Creation of Agency

b. By Implied Agreement (S.187): � Arising out of conduct of the parties

� Inferred from circumstances

� Partners, servants, wife are regarded as agents by implication bytheir relationship

�Principal will not be entitled limit the implied authority of theagent without notice to the third party



Creation of Agency

Implied agency includes the following:i) Agency by estoppel

ii) Agency by holding out

iii) Agency by necessity

Estoppel where a person leads willfully another person to believethat a certain state of affairs exits and induces him to act on that behalf so as to alter his previous position, he is estopped fromdenying subsequently the fact of that state of affairs



Creation of Agency

i) Agency by es

toppel:Agency by estoppel arises when a person is held out as an agent a) even though he is actually not an agent, or b) after he ceasedto be an agent

ii) Agency by Holding Out:Where a person permits another by a long course of conduct topledge his credit for certain purposes: he is bound by the act of such person in pledging his credit for similar purposes, without the previous permission of his master. This is a case of agency by

Holding Out.Eg., A husband holds out his wife as having his authority and a

third party advances money to the wife on faith of the conduct of the husband, the husband is liable for such debts.



Creation of Agency

iii) Agency by necessity:

Agency by necessity is conferred by law in certainurgent circumstances.

Eg., In an emergency, a person protects the property or interest of another which are in imminent danger andconsent of the owner cannot be obtained. In suchcases the law assumes the consent of the owner tothe creation of agency. The person protecting the

property would be deemed to be an agent provided heacted bonafide in the interest of the owner.



Creation of Agency

C. By Ratification:

� Subsequent adoption of an un-authorised act by a person doneon his behalf by another person.

� Ordinarily, a person is not bound by such unauthorized acts doneon his behalf, but if he later accepts them by ratifying, hebecomes the principal and the later becomes the agent.

� Ratification may be either expressed or implied.



Duties of AgentD epends on nature of agency

1. Follow directions of Principal (S.211)

2. Conduct Business with reasonable Skill & D eligence (S.212)

3. Render Proper Accounts to Principal (S.213)

4. Communicate with Principal in Case of D ifficulty (S.214)

5. Not to D eal on his Own Account (S.215)

6. Not to Make any Secret Profit (S.216)

7. Pay Sum Received for Principal (S.218)

8. Not to D elegate Authority (S.190)

9. On Principals D eath or Insanity (S.205)

10. Not to Use Information Obtained in the Course of theAgency against the Principal

11. Not to Set-up an Adverse Title



Duties of Principal(to an agent)

1. To indemnify against all lawful (in exercise of authority conferred) acts

2. To indemnify against acts done in good

faith/injury to 3rd

person (S.223)3. To indemnify for injury caused by principals

neglect (S.225)

4. To pay commission & other remuneration

agreed(However, where one person employs another to do an act

which is criminal, employer not liable to the agent, toindemnify for consequences(S.224))



Rights of Principal

When an agent fail

sin h

is dutie

s

1. To Recover Damages

2. To Obtain an Account of Secret Profits &Recover Them and Resist a Claim for

Remuneration(Contract with 3rd party is not rendered void)

3. To Resist Claim for Indemnify against LiabilityIncurred



Termination of Agency

1. By the act of the partiesi) By mutual agreement

ii) By Revocation by the Principal

iii) By Revocation by the Agent

2. By operation of Lawi) By Performance or completion of Agency

ii) By Death or Insanity

iii) By Insolvency of the Principaliv) By Expiry of Time

v) By Destruction of the Subject Matter

vi) By Dissolution of a Company

vii) By Principal or Agent becoming Alien Enemy

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