BUSINESS.

LAW

“CONTRACT.OF.AGENCY”

Submitted.To:
ZIA.KiANI

Submitted.By:
SYED.JUNAID.ALI

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 CONTRACT OF AGENCY

INTRODUCTION

The.concept..of.agency..was.developed..as.one.cannot.possibly.do.every.transaction.himself..
Hence,.he.should.have.opportunity.or.facility.to.transact.business.through.others.like.an.agent.
.Principles.of.contract.of.agency-
(a).Expecting.matters.of.a.personal.nature,.what.a.person.can.do.himself,.he.can.also.do.it.thro
ugh.agent.(e.g..a.person.cannot.marry..an.agent,.as.it.is.a.matter.of.personal.nature)..

(b).A.person.acting.through.an.agent.is.acting.himself,.i.e..act.of.agent.is.act.of.principal..Sinc
e.agency.is.a.contract,.all.usual.requirements.of.a.valid.contract.are.applicable.to.agency.contr
act.also.except.to.the.extent.excluded.in.the.Act..One.important.distinction.is.that.as.per.Sec..
185,.no.consideration.is.necessary.to.create.an.agency.

Who.may.be.an.agent-
.As.between.the.principal.and.third.person.any.person.can.become.an.agent,.but.no.person.wh
o.is.not.of.the.age.of.majority.and.of.sound.mind.can.become.an.agent,.so.as.to.be.responsible
.to.his.principal.according.to.the.provisions.in.that.behalf.herein.contained.(Sec..184)..The.sig
nificance.is.that.a.principal.can.appoint.a.minor.or.person.of.unsound.mind.as.agent..In.such.c
ase,.the.principal.is.responsible.to.third.parties..

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 AGENCY.CLASSIFICATION

Express. Agency..

.A.person.may.be.appointed.agent,.either.by.word.of.mouth.or.by.writing..No.particular.form.
is.required.for.appointing.an.agent.

Implied.Agency.

.An.agency.which.arises.from.the.conduct,.situation.or.relationships.of.parties.

Agency.By.Estoppel.

When.a.person.has.by.his.conduct.or.statements.induced.others.to.believe.that.a.certain.person
.is.his.agent,.he.is.estopped.from.subsequently.denying.it.

Agency.By.Holding.Out.

Though.part.of.the.law.of.estoppel,.some.affirmative.conduct.by.the.principal.is.necessary.in.c
reation.of.agency.by.holding.out.

Agency.Of.Necessity.

This.arises.where.there.is.no.express.or.implied.appointment.of.a.person.as.agent.for.another.
but.he.is.forced.to.act.on.behalf.of.a.particular.person.

Agency.By.Ratification.

Where.an.agent.does.an.act.for.his.principal.but.without.knowledge.or.authority.or.
where..he.exceeds.the.given.authority,.the.principal.is.not..held.bound.by.the.transaction.

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 DEFINITION OF AGENT & PRINCIPLE

AGENT:

An„AGENT‟.is.a.person.employe.to.do.act.for.anotherparty.or..represent.another.in.dealings.
with.third.persons.The.person.for.whom.such.act.is.done.or.who.is.represented.is.called.the.pr
incipal..The.relationship.between.the.agent.and.the.principal.is.called.“agency”...The.function.
of.an.agent.is.to.bring.his.principal.Into.contractual.relations.with.third.persons.

An.agent.may.act.for.a.principal.in.arranging.just.one.transaction..However,.it.is.common.in.b
usiness.for.an.agent.to.act.regularly.on.behalf.of.a.principal,.arranging.large.numbers.of.differ
ent.business.transactions.and.contracts.However,.it.might.be.useful.to.have.a.simple.example.
of.an.agentprincipal.relationship.in.mind..One.example.is.using.an.agent.appointed
for.the.sale.of.goods..The.agent.will.act.on.behalf.of.the.owner.(the.principal).and.try.to.find.a
.buyer.(a.third.party)..If.the.agent.is.successful.and.the.goods.are.sold,.the.contract.for.the.sale
.and.purchase.of.the.goods.is.between.the.seller.and.the.buyer..The.agent.does.not.enter.into.a.
contract.with.the.buyer.(the.third.party).dalthough.he.has.an.agreement.with.the.principal.(from.
which.he.will.earn.a.fee).

PRINCIPAL
The.person.for.whom.act.is.done.by.an.agent.or.who.is.represented.in.dealings.with.third.pers
ons.by.an.agent.is.called.as.principal..

WHO.MAY.BECOME.PRINCIPAL.?

.Any.person.who.is.of.the.age.of.exceed to 18 .and follow the law of majority

.and.who.is.of.sound in.mind.may.employe an.agent..It.has.been.held.that.a.guardian.of
minor.can.appoint.him(.minor).as.agent...

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PRINCIPLES.OF.AGENCY

Contracts.of.agency.are.based.on.two.important.principles,.namely:

 Whatever.a.person.can.do.personally.shall.also.be.allowed.to.be.done.through.an.agent
.except.in.case.of.contracts.involving.personal.services.such.as.painting,.marriage,.sin
ging,.etc.
 He.who.does.not.act.through.a.duly.authorized.agent.does.it.by.himself,.i.e.,.the.act.of.
the.agent.are.considered.the.acts.of.the.principal.(Sec..226).

CLASSIFICATION.OF.AGENT.
1. General.Agent:

A.general.agent.is.one.who.has.authority.to.do.all.the.acts.in.the.ordinary.course.of.trade.or.pr
ofession.
2. Special.Agent.
A.special.agent.is.one.who.has.the.authority.to.do.a.particular.act.in.a.particular.transaction..
3..Universal.Agent.
A.universal.agent.is.one.who.has.authority.to.do.all.acts.which.the.principal.can.do.and.delega
te.
4..Broker.
A.broker.is.the.person.who.negotiates..and.makes.contracts.between.the.principal.and.third.pa
rty...He.is.not.entrusted.with.the.possession.of.goods.and.hence.he.has.no.right.of.lien.on.the.
goods.

5..Factor.
A.factor.is.one.who.is.entrusted.with.the.possession.of.the.goods.and.who.has.authority.to.buy
.,sell.or.otherwise.deal.with.the.goods...
6. Auctioneer.
He.is.the.one.who.is.entrusted.with.the.possession.of.the.goods.for.sale.at.a.public.auction...H
e.has.right.to.lien.on.the.goods.for.his.charges..
7..Commission.Agent.

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This.term.is.used.for.both.–.Factor.and.broker.
8..Del.–.Creder.Agent.
Agent.gives.guarantee.of.3rd.person.with.whom.he.is.entered.into.contract.for.the.performance
.of.obligation...An.agent.who.has.undertaken.the.risk.of.bad.debts.due.to.insolvency.of.custo
mer.to.whom.the.goods.is.sold.on.credit.called.as.del.–.creder.agent..
9..Banker..-.for.cheque.,.draft.,.etc

DUTIES.OF.AGENT.

1..The.agent.must.carry.on.the.business.as.per.the.directions.given.by.principal...If.directions.
given.by.principal.are.ignored.by.the.agent.and.business.carried.on.by.agent.as.per.his.own.ju
dgments,.agent.himself.will.be.held.responsible.for.the.same..

2..Agent.should.conduct.the.business.with.skill.and.diligence.that.is.generally.possessed.by.th
e.person.engaged.in.similar.business..Ex.–.Lawyer,.C.A.

3..The.agent.must.keep.proper..accounts.of.the.business.
4..Duties.of.agent.in.an.unforeseen.event
5..The.agent.should.not.make.any.secrete.profit.
6..Agent.should.not.disclose.the.confidential.information.to.3rd.party..

DUTIES.OF.PRINCIPAL.
1. Duties.of.principal.towards.Agent.

 The.principal.is.liable.to.indemnify.the.agent.against.the.consequences..of.all.lawful.ac
ts.done.by.the.agent.while.exercising.the.authority.(.except.criminal.acts.of.agent.)

 Principal.must.pay.compensation.to.the.agent.for.any.injury.suffered.by.the.agent.due.t
o.the.principal‟s.negligence.or.principal‟s..lack.of.skills.

2...Duties.of.principal.towards.third.party

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  The.principal.is.liable.to.3rd.party.for.the.acts.committed.by.agent.so.long.as.such.acts.
must.be..within.the.scope.of.authority.

 If.the.agent.exceeds.his.authority.and.part.of.his.act.within.the.scope.of.his.authority.,.t
he.principal.is.liable.for.the.act.which.is.within.the.scope.of.authority.of.the.agent...Pri
ncipal.will.not.be.liable.for.the.acts.of.the.agent.which.are.not.within.the.scope.of.auth
ority..

 Even.principal.whose.name.is.not.disclosed.remains.liable.to.the.3rd.party..

EXAMPLE.OF.AGENT.&.CONTRACT.OF.AGENCY.

1) X.is.commissioned.agent.appointed.by.Y.to.sell.certain.goods.on.his.behalf...Y.ha
s.given.instructions.that.goods.is.to.be.sold.on.cash.payment...But.X.sold.the.good
s.on.credit...If.credit.becomes.bad.debts.due.to.insolvency.then.X.himself.will.be.
held.responsible.for.the.same..
2) Ex.-
..A.horse.was.sent.by.rail.at.the.destination.it.was.not.taken.delivery.by.the.owner
..The.station.master.had.to.feed.the.horse..Held,.station.master.became.the.agent.b
y.necessity.and.hence.the.owner.must.compensate.him.
3) Ex.-
.A.child.purchase.goods.from.a.shop.and.desires.the.shopkeeper.to.collect.payme
nt.from.his.parents.later..The.parents,.though.not.bound.to.pay,.make.the.payment
..After.a.few.days,.the.child.again.makes.purchases.from.the.shop.on.the.credit.of.
the.parents..The.parents.would.be.bound.this.time.because,.by.making.payment.ea
rlier.without.raising.any.objection,.they.had.held.their.child.out.as.their.agent.for.
making.such.purchases.
4) Ex.-
..L.made.an.offer.to.X,.MD.of.a.company..X.accepted.the..offer.though.he.had.no
.authority.to.do.so..L.subsequently..withdrew.the.offer,.but.the.company.ratified.
X’s..acceptance.
5) Ex.-
...A.tells.B.that.he.is.C’s.agent,.this.he.does.in.the.presence.of.C.and.within.his.he

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 aring..C..does.not.object.to.the.statement.of.A.is.actually.not.his.agent..Later.B.m
akes.a.deal.with.A.as.agent.of.C..C.shall.be.bound.by.this.deal..

6) Ex.-
...In.the.case.of.Watteau.v.Fenwick,[5].Lord.Coleridge.CJ.on.the.Queen's.Bench.conc
urred.with.an.opinion.by.Wills.J.that.a.third.party.could.hold.personally.liable.a.princip
al.who.he.did.not.know.about.when.he.sold.cigars.to.an.agent.that.was.acting.outsid
e.of.its.authority..Wills.J.held.that."the.principal.is.liable.for.all.the.acts.of.the.agent.w
hich.are.within.the.authority.usually.confided.to.an.agent.of.that.character,.notwithsta
nding.limitations,.as.between.the.principal.and.the.agent,.put.upon.that.authority.".Thi
s.decision.is.heavily.criticised.and.doubted,[6].though.not.entirely.overruled.in.the.UK..
It.is.sometimes.referred.to.as."usual.authority".(though.not.in.the.sense.used.by.Lord
.Denning.MR.in.Hely-
Hutchinson,.where.it.is.synonymous.with."implied.actual.authority")..It.has.been.expl
ained.as.a.form.of.apparent.authority,.or."inherent.agency.power.

BIBLIOGRAPHY

www.wekepedia.org/wiki/agency(Law)

www.scribd.com/doc/2441357/General