P.S.

Swathi Associate Professor SSIM

Introduction
Law of Agency deals with the ratification of the acts of

one person by other person on whose behalf the person does the acts. It is contractual relations established with third parties. The person who enters into contract with third parties is called as an agent and the person on whose behalf the contract is entered into is called as principal.

Definition
Agent (Sec 182): An agent is a person who is employed

to bring his principal into contractual relations with third parties. It means that an agent is a mere connecting link between his principal and the third party.

Creation of Agency
A contract of agency may be express or implied.
Express Agency: A contract of agency may be made

orally or in writing. The written document which gives a person to act on behalf of his principal in accordance with the terms and conditions therein is called Power of Attorney. Delhi Electric Supply Undertaking v. Basanti Devi

Implied Agency
Implied agency may arise conduct, situation of parties

or necessity of the case. (a) Agency by Estoppel (b) Wife as agent (c) Agency of necessity (d) Agency by ratification

 (a) Agency by Estoppel (Sec.237) : When a person

allows third parties that A is acting as his authorized agent, he will be estopped from denying the agency if such third parties relying on it make a contract with A even when he had no authority at all.

 (b)Wife as agent : Where a husband and wife are living together, the wife is presumed to have husbands authority to pledge his credit for the purchase of necessaries of life suitable to their standard of living. She can exercise her right only when there no opposition from her husband. If the husband specifically instructions to the trader not to give necessaries on credit he is not responsible for the further consequences.

 Provided that the husband has supplied his wife sufficiently with the articles in question or she was supplied with a sufficient allowance.
(b) Agency by ratification (Sections 169-200) : It is also called as ex post facto agency agency arising after the event. Where a person having no authority purports to act as agent or a duly

appointed agent exceeds his authority, the principal is not bound by the contract.

 But the principal may ratify the agents transaction and so

accept liability .In this way, an agency by ratification arises. The effect of ratification is to render the contract binding on the principal as if the agent had been authorized before hand. Ratification is effective only If: the contract is in written form the principal is competent to enter into contract for lawful acts

Classes of Agents
1. 2. 3. 4. 5. 6. 7. 8. 9.

Special Agent General Agent Mercantile Agents Factors Brokers Del Credere Agent Auctioneers Partner Bankers

Special Agent
Special Agent: A special agent is one who is appointed to do

a specific act, or to perform a specified function. He has no authority outside this special task. The third party has no right to assume that the agent has unlimited authority. Any act of the agent beyond that authority will not bind the principal. General Agent: A general agent is appointed to do anything within the authority given to him by the principal in all transactions. Third party may assume that such an agent has power to do all that is usual for a general agent to do in the business involved.

 Mercantile Agents: Section 2(9) OF THE Sale of Goods Act,

1930, defines a mercantile agent as a mercantile agent having in the customary course of business has such agents authority either to sell goods or to consign goods for the purpose of sale or to buy brokers, auctioneers and commission agents. Factors: A factor is a mercantile agent employed to sell goods which have been placed in his possessions or contract to buy goods for his principal.

 Brokers: A broker is a mercantile agent whose ordinary

course of business is to make contracts with other parties for the sale and purchase of goods and securities of which he is not entrusted with the possession, for a commission called brokerage. He acts in the name of principal. He has no lien over the goods, as he is not in possession of them. Del Credere Agent : A Del Credere agent is a mercantile agent, who in consideration of an extra remuneration guarantees to his principal that the purchasers who buy on credit will pay for the goods they take. In the event of a third party failing to pay, the Del Credere agent is bound to pay his principal the sum owned by the third party.

 Auctioneers : An auctioneer is an agent who sells goods by

auction , i.e. to the highest bidder in public competition. He has no authority to warrant his principal's title to the goods. He is an agent for seller but after the goods have been knocked down he is agent for the buyer also for the purpose that the sale has taken place. Partner: In a partnership form every partner is an agent of the firm and of his co-partners for the purposes of the business of the firm.

 Bankers: The relationship between a banker and his

customer is primarily debtor and creditor. In addition, a banker is an agent of his customer when he buys or sells securities, collects cheques dividends, bills or promissory notes on behalf of his customer. He has a general lien on all securities and goods in his possession in respect of the general balance due to him by the customer.

Rights of Agents
If the services rendered by the agent are not gratuitous or

voluntary, the agent is entitled to receive the agreed remuneration, or if none was agreed, a reasonable remuneration. The agent becomes entitled to receive remuneration as soon as he has done what the had undertaken to do. (Section 219). For Example: Factors, who have goods and property of their principal in their possession, have a lien on the goods or property in respect of their remuneration and expenses and liabilities incurred.

Rights of the agent contd

He has a right to stop the goods in transit where he is an

unpaid seller. As the agent represents the principal, the agent has a right to be indemnified by the principal agent, all charges, expenses and liabilities properly incurred by him in the course of the agency (sections 222-223).

Duties of the Agent

Duties of Agent: An agents duties towards his principal are

as follows: 1. An agent must act within the scope of the authority conferred upon him and carry out strictly the instructions of the principal. 2. In the absence of any such instructions he can follow the custom prevailing in the place where he is doing his business. 3. It is his duty to give accounts to the principal about the profits and if he incurs any loss because of his negligence he has to make good to his principal.

Duties of the agent

the agent has to use his skill and has to act with due

diligence while conducting the business He has to compensate the principal if any loss is caused to the principal due to his direct negligent act, want of skill or misconduct. An agent is bound to render proper accounts to his principal on demand. He is also under an obligation to keep his own accounts, property, etc., separate from those of his principal and others.

 The agent is bound to pay to his principal all sums

received on his account after deducting there from all monies due to himself in respect of advances made or expenses properly incurred by him in conducting such business and also such remuneration as may be payable to him for acting as agent. In cases of difficulty it is the duty of an agent to use all reasonable diligence in communicating with his principal and in seeking to obtain his instructions.

 In case the principal dying or becoming of an unsound

mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him. The agent shall not deal on his own account in the business of the agency, without first obtaining the consent of the principal and acquainting him with all material circumstances which have come to his own knowledge on the subject.

 The agent shall not use information obtained in the

course of his agency against the principal. The agent shall not make secret profits from agency, beyond the agree commission or remuneration. Secret profit is an advantage obtained by an agent over and above his agreed remuneration or commission. The agent must not set up an adverse title, i.e., he must not set up his own title or the title of the third parties to the goods received by him from his principal

 Where the acts beyond his authority and commits

misrepresentation of fraud he is personally liable to the principal. Agent is liable to pay damages for breach of contract. Neglect and misconduct of an agent in informing his principal of the purchase of goods make the agent liable to pay damages. The agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.

Rights of Principal
If an agent deals on his own account in the business of the

agency, without first obtaining the consent of his principal . The principal has the following rights: 1. He may repudiate the transaction 2. He may affirm the transaction and claim the benefits 3. He may claim damages for loss caused to him If the agent without the knowledge of the principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim

 Where acts are done by one person on behalf of another

but without his knowledge or authority, he may elect to ratify or disown such acts. The principal may revoke the authority given to his agent by giving a reasonable notice of revocation at any time before the authority has been exercised so as to bind the principal. Where the agent acts contrary to the directions given by the principal or where loss is caused due to agents neglect, want of skill or misconduct the principal has a right to claim loss or profit from the agent.

Duties and liabilities of Principal

The principal is bound to indemnify his agent against

the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him. The principal is liable to indemnify the agent not only against the lawful acts but also against the unlawful acts of an agent done in good faith. The principal must make compensation to his agent in respect of injury caused to the agent by the principals neglect or want of skill.

 It is the principals duty to pay his agent such remuneration

as may be payable to him for acting as agent and also all monies due to the agent in respect of advances made or expenses properly incurred by the agent in conducting principals business. Principal is liable for the contracts entered into through an agent and obligations arising from acts done by an agent. Principal is bound upon any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal.

 When an agent has without authority, done acts or

incurred obligations to third persons on behalf of his principal bound by such acts or obligations, if he has by words or conduct induced such third persons to believe that such acts and obligations, were within the scope of the agents authority.

Termination of Agency
Agency may be terminated

By act of parties 2. By operation of law 3. Other modes of termination of agency

1.

By Act of the parties

By agreement: Agency may be terminated by the parties by

an agreement at any time by mutual consent. By revocation and renunciation: An agency is terminated by principal revoking agents authority by notice. By renouncing: When the agent renounces the business of the agency, the agency is terminated . By completion or performance: When the business for which the agency was constituted is completed or performed, the agency is terminated. For example, when an agent is appointed to sell a house, agency is completed when the house is sold.

By operation of Law
By death or insanity: When the principal or agent dies

or becomes of unsound mind, the agency is terminated. In case of corporation, the agency is terminated on its being wound up. In India , mere the death of the principal cannot terminate the agency until the agent has heard of it. By Insolvency of the principal: On principal being adjudicated an insolvent under the provisions of any Act for the time being force for relief of insolvent debtors, the agency is terminated.

Other modes of termination of agency

1.

By efflux of time: Where an agency is for a fixed period of time, it is terminated on the expiry of time whether the purpose for which the agency is constituted is accomplished or not. 2. By destruction of the subject-matter: When the subject matter of the agency is destroyed the agency is terminated. 3. By incapacity of principal or agent: Where a principal or an agent possesses any disqualification essential to a contract, agency is terminated.

 Principal or agent becoming an alien enemy: Where a

principal or the agent belong to different countries and they become alien enemies, the agency is terminated. By object of agency becoming unlawful: when by the happening of an event which renders agency or its object unlawful, the agency is terminated.