ASSIGNMENT VI – SPECIAL CONTRACTS

MEHUL SINGH PATEL

19FLICDDN01152

BBA.LLB (HONS) SEC B

Q.1. WHAT IS CONTRACT OF AGENCY?

Agency is an agreement by which a relation based upon an expressed or implied. There is one
person the agent, who is authorized to act under the control of and for another, principal in
negotiating and making contract with third person. According to Indian Contract Act, 1872
“Contract of agency is a contract by which a person employs another person to do any act for
himself or to represent him dealing with third person”. The principal is only responsible up to
the extent to which the agent is assigned rights to do act beyond this boundary the principal
isn’t responsible but the agent is self-responsible. While making contract there may be or
may not be consideration. Agency is process of delegating the authority by a principal to the
agent to act and represent from his behalf. The act done and representation made by an agent
aren’t the act of the agent but arte regarded as the act of principal. Therefore rights and duties
created by agent are the right and duties of the principal. However some acts relating to
personal skill cannot be done through agency.

Following act can be done through Agency:-

 To do at for himself.
 To run commercial transaction by agent.
 To do transaction with third person.
 To establish legal relation with principal and third person

Q.2. WHAT ARE THE RIGHTS AND DUTIES OF AN AGENT?

RIGHTS
1. Right of Retainer: Agent has right to deduct the amount which is due to him by
principal, from amount payable to principal.
2. Right to claim Remuneration: As per the terms of agency contract, agent has rights to
claim remuneration.
3. Right of Indemnity: Principle of indemnity gets operated between principal and agent
where principal is implied indemnifier and agent is implied indemnity holder. So
agent can make principal answerable for all types of sufferings.
4. Right of lien: Agent can exercise right of lien but contract act has not specified
whether it is general lien or particular lien. Therefore the nature of agent’s lien
depends upon mutual understanding.
5. Right to compensation: an agent has right for compensation for his services given.
DUTIES

1. Agent should follow the instructions given by the principal.

2. If agent comes across any complicated situation, he has to communicate that situation
to principal and his advice is to be obtained.
3. Agent should behave in his capacity as agent, he should not run the transaction in his
own name.
4. Agent should not make secret profits by utilizing reputation of the principal.
5. Agent should safe guard property of principal particularly upon happening of events
like death of principal, insolvency of principal, etc.
6. Agent should maintain proper accounting records to enrol the transactions run by him.
Agent has to remit amounts to principal properly.
7. Agent has to remit amounts to principal properly.
8. Agent should not carry on delegation.

Q.3. WHAT IS THE PERSONAL LIABILITY OF AN AGENT AND WHAT

IS THE LIABILITY OF PRINCIPAL TO THIRD PARTIES?
PERSONAL LIABILITY OF AGENT:

The general rule is that an agent cannot be made personally liable for the contracts entered
into by him on behalf of his principal; neither is he personally bound by them.

The circumstances under which an agent is personally liable to his principal acts are as
follows:-

1. When he agrees with the concerned parties (Sec. 230).

2. An agent who is not having any authority to act as an agent or who has exceeded the
authority and the same has not been ratified by the principal, is personally liable for any loss
bearded by a third party (Sec. 235).

3. A person with whom a contract has been entered into in the character of agent is not
entitled to require the performance of it, if in reality he was acting not as agent, but as
principal (Sec. 236).

4. When he is acting for a foreign principal.

5. Where the agency is coupled with interest that is the agent has interest in the subject matter
of the agency.

6. When the agent signs a negotiable instrument in his own name without making it clear that
he is signing as an agent.

7. Where trade, usage or customs holds him liable in certain kinds of business.
8. Where the agent acts for a principal who cannot be sued an account of his being a foreign
sovereign Ambassador Etc.

9. Where the agents acts for an undisclosed principal.

LIABILITY OF PRINCIPAL TO THIRD PARTIES

1. Named principal:

When the agent contracts as agent for a name principal, the principal is:

(a) Bound by all the acts of the agent.

(B) Liable when the agent exceeds his authority

(c) Bound by the notice.

2. Unnamed principal:

In this case the principal will be liable for the contract made by the agent unless there is a
trade custom making the agents personally liable.

3. Undisclosed principal:

The agent become personally liable and can be sue and be sued in his own name.

Q.4. WRITE A NOTE ON TERMINATION OF AGENCY.

(A) Termination of Agency by acts of the parties

An agency to be terminated according to the desire or the act of the principal and agent is
regarded as the termination of agency by an act of the parties. Fall under this the following
modes:-

By agreement: – An agency, like any other contract, can be terminated at any time by the
mutual agreement between the principal and agent. In fact, an agreement brings out an
agency which can be terminated by another agreement.

By revocation: – The principal may revoke the authority of the agent at any time, by giving
notice to the agent before the agent has exercised his authority to bind the principal. Non-
service of notice binds the principal for compensation. The revocation should be based on
reasonable ground. If the third party enters into a contract with an agent with good faith
without knowledge of revocation, this contract binds the principal.

Renunciation by the agent: – An agent is also not bound to continue agency against his will.
Unless otherwise mentioned in the contract if the agent voluntarily decides not to continue
agency, serving a reasonable notice to the principal in time he can renounce agency. Lacking
notice makes it necessary to compensate the principal. The renunciation must be based on
reasonable ground. The agent who renounces the agency has no right to claim remuneration
for his performed work.
By completion of work: – When the parties perform their respective duties, the agency comes
to and. Unless otherwise mentioned in the contract, if the agent has been appointed for any
specific work, the agency is terminated as soon as the work is completed.

(B) By the operation of law agency’s termination:

An agency which gets automatically terminated due to application of the law is known as
termination of agency by operation of law. It includes the following modes: –

By expiry of time S. 61 (1) (d): – Where an agent has been appointed for a fixed term the
expiration of the terms puts an end to the agency, whether the purpose of the agency has been
accomplished or not.

By death or insanity s.61(c): – Unless otherwise mentioned in the contract, the agency is
terminated with the time of the death or insanity of the principal or the agent.

By insolvency of the principal S.59(1) (f): – Unless otherwise mentioned in the contract, if
the principal is declared insolvent, the agency is terminated from this declaration. It is not
clear in the case of insolvency of the agent in the ICA & NCA but it is also accepted that the
insolvency of agent also puts an end the agency business.

By the destruction of the subject matter S.59 (1) (g): – An agency which is created to deal
with the certain subject matter will be terminated by the destruction of that subject matter.
For example, where the agency was created for the sale of a house and the house is destroyed
by fire, the agency ends.

By dissolution of a company S. 59(1) (g):- A company being a legal person comes to end
when it is dissolved or liquidated. Unless otherwise mentioned in the contract, the agency is
automatically terminated when the principal or agent is a company is liquidated.