CONTRACT OF AGENCY

It is a special contract

It is contained in the Chapter X of the Indian Contract Act

Essentials

Agreement between principal and agent

Intention of the agent to act on behalf of the principal

There is only an agreement & there is no CONTRACT

Rules of Agency

What ever a person can do personally, he can do through an agent He who does an act through another does it himself

Who can employ an agent?

Who may be an Agent?

TEST OF AGENCY
In determining whether the agency relationship exists or not, the following questions need to be answered:

Whether the person has the capacity to bind the principal and make him answerable to third parties;

Whether he can create legal relation between the principal and third parties

CREATION OF AGENCY
Express

Agreement Implied Agreement

Estoppel, Holding-out, Out

of necessity

Ratification;

and by Operation of Law

Express Agreement

By writing (like power of attorney)

By oral or simple agreement

Implied Agreement
Estoppel, Isaac regularly visits D B Tours office and helps them. One client paid money to Isaac for a ticket, but Isaac forgot to do the needful Holding-out, Isaac is regularly send for marketing. One day he secured a big order which DB could not handle Out

of necessity

Ratification

Isaac was asked to accompany a high profile client of DB Tours. At Ekm, Taj Residency was overbooked so he had to accommodate the guest at Le Meridiens presidential suite. This resulted in a loss of ten thousand rupees

Ratification is the approval of previous act done with out the authority.

In the agency contracts, sometimes ratification becomes necessary on the part of the principal for the acts done by the agent with out the authority.

Effect of ratification

According to section 196 of the contract act the effects of the ratification is that all the done by the agent will bind the principal as if they had been performed by his authority Another effect of the ratification is that the agency comes in to existence the moment the agent does the act and not from the time when the principal ratified the act

Express and implied ratification

An express ratification cannot become complete until its communicated An implied ratification is one which can be inferred either from the conduct of the parties or from the circumstances of the case or from both

Essentials of ratification

1. 2. 3.

4.

The agent must have purport to act as agent for a principal The principal must be in existence at the time of contract The principal must have contractual capacity at the time of entering into contract at the time of ratification Ratification must be with full knowledge of facts. No valid ratification can be made by persons whose knowledge of facts of the case is materially defective

5. Ratification must be done with in a reasonable time. Ratification must be done within a reasonable time of the act purported to be ratified. 6. The act to be ratified must be lawful and not void or illegal 7. The whole transaction can only be ratified

8. Ratification must be communicated. Where a transaction is founded on ratification 9. Ratification can be of the acts which principal had the power to do. The acts which the principal is incapable of doing cannot be rectified 10. Ratification should not put a third party to damage

CLASSIFICATION OF AGENTS

SPECIAL AGENT for single act

GENERAL AGENT for all related

UNIVERSAL AGENT for all related and unrelated

I Commercial or Mercantile Agent

Broker Commission Factor Auctioneer

agent

Del

Credere Agent

 Sub

agent

Co

agent

Substituted

agent

II Non- Mercantile agents

Attorneys

Insurance

agents Wife / Husband etc.,

Wife / Husband
Bill

is a poor man living in a rented house at Ernakulam along with his wife. His wife, usurped her position as wife and buys on instalment a Pajero.

Where the wife lives apart

Husbands fault

Wifes fault

Agents authority

Associated Holidays is accompanying the guests of ITDC tours. Standard room accommodation was arranged. But due to some issue the guest refused to stay in the arranged room. The tour executive upgraded the room and Associated Holidays charged additionally for the same.

RELATIONS OF PRINCIPAL AND AGENT

Duties and rights of agent Duties and rights of principal

Duties of an agent

To carry out the work according to the direction given by the principal To carry out the work with reasonable care, skill and diligences to communicate with principal in case of difficulty To pay sum received for the principal To protect and preserve the interest of the principal in case death or insolvency

not to use information obtained in the course of the agency against he principal Not to make a secret profit from the agency Not to set up an adverse title Not to put himself in a position where interest and duty conflict

Not to delegate Agency Render proper accounts [section 213]. Not to deal on his own account, in business of agency [section 215]. Agents duty on termination of agency by principals death or insanity - [section 209].

Rights of an agent

Right of retainer ,( that means it is possible to the agent to retain whole money on behalf of principle till he get his remuneration) Right to receive the remuneration Right of lien - retain goods peppers and property of the principal until amount due to himself for commission and services in respect the same has been paid by the agent Right of indemnification - right to get compensate against consequences Right of stoppage in transit - good can hold on way to business

REMUNERATION TO AGENT
Consideration

is not necessary for creation of agency. However, if there is an agreement, an agent is entitled to get remuneration as per contract.

RIGHTS OF PRINCIPAL

Recover damages from agent if he disregards directions of Principal Obtain accounts from Agent Recover moneys collected by Agent on behalf of Principal Obtain details of secret profit made by agent and recover it from him Forfeit remuneration of Agent if he misconducts the business.

DUTIES OF PRINCIPAL

Pay remuneration to agent as agreed Indemnify agent for lawful acts done by him as agent Indemnify Agent for all acts done by him in good faith Indemnify agent if he suffers loss due to neglect or lack of skill of Principal.

PRINCIPALS LIABILITY TO THIRD PARTIES FOR THE ACTS OF THE AGENT

I.

II.

III.

Where the Principals Existence and name are disclosed Where the Principals Existence and not the name is disclosed Where the Principals Existence and name are not disclosed

When an agent contracts as agent for a named principal

When the agent acts within his authority When the agent exceeds his authority Principal bound by the notice given to the agent Liability of the principal by estoppels Liability for misrepresentation on fraud by an agent

An agent contracts for an unnamed principal

Where

an agent signs the contracts as a broker, to my principal,

An agent contracts in his own name for an undisclosed principal

Same effect as if the principal is disclosed If the principal is disclosed before the contract is completed, then the third party may refuse to fulfil the contract upon proof that he would not have entered into contract had he known who the principal was. Undisclosed principal cannot sue if the terms of the contract exclude him from doing so.

Personal liability of agent

When the contract expressly provides When the agent acts for the foreign principal When the agent acts for the undisclosed principal Where he signs a contract in his own name

Where he acts for a principal who is not in existence Where he receives / pays money by mistake or fraud Authority coupled with interest Where trade usage or custom makes him personally liable

TERMINATION OF AGENCY

Act of Parties
Agreement Principal Revokes Agent Revokes

Operation of law

Performance

Expiry of time

Death

Insanity

Insolvency

Destn of Sbj Matter

Principal Alien Enemy

Dissolution

Termination Of Sub-agents authority

TERMINATION OF AGENCY

By

the act of parties

By the operation of laws

By the act of parties

By

agreement revocation by the principal

By

By

renunciation of the agent

By operation of laws

On the completion of the business of the agency: By expiry of time By the destruction of the subject matter of the agency In solvency of the principal Death or insanity of the principal or agent Dissolution of the company The principal becoming an alien enemy Termination of the sub-agents authority

In following cases, an agency cannot be revoked

Agency coupled with interest (section 202) Agent has already exercised his authority (section 203) Agent has incurred personal liability.