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Legal Aspect of Business

Law to edit Master subtitle style Clickof Agency (sec.182-238) Quasi Contract Minors Partnership

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Introduction
When people do business, they often deal with each other directly Buyer Seller However, sometimes they deal with each other using a middleman (or representative or intermediary) Buyer Middleman Seller
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Introduction (cont.)
The legal relationship between the middleman and the businessperson is governed by the law of agency

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Definition of Agency
The legal term for a middleman or representative is an agent The person who is represented by the agent is called the principal Therefore, in our example Buyer Middleman Seller If the middleman represents the buyer Principal Agent Seller
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Definition of Agency (cont)


Definition:
An agent is a person who is authorised to represent another person, who is called the principal. n The agent creates a legal relationship between the principal and a third party.
n

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Definition of Agency (cont)


Therefore, any contract entered into is between the principal and the third party, even though it is arranged by the agent The agent does not usually get any rights or responsibilities under the contract Therefore, it is the principal who must have the capacity to contract and not the agent

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Forms of Agency
There are several different forms of agency A general agent has the power to act for the principal in all business matters A special agent only has the authority of the principal for one transaction A del credere agent guarantees to the principal that if the third party does not pay then the agent will pay.
n

The agent usually takes a higher commission for this


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Forms of Agency (cont.)


A marketing agent has limited authority to introduce potential clients to the principal. He does not have the authority to negotiate or enter into contracts on behalf of the principal A distribution agent is appointed by a supplier to arrange for distribution of the suppliers goods in a particular place.
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Forms of Agency (cont.)


Note: a franchising arrangement where one person allows another person to run a business using the original name of the business is not a form of agency
n

Eg McDonalds

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The principles of contract of agency


(a) Excepting matters of a personal nature, what a person can do himself, he can also do it through agent (e.g. a person cannot marry through 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. - - Since agency is a contract, all usual requirements of a valid contract are applicable to agency contract also, except to the extent excluded in the Act. One important distinction is that as per section 185, no consideration is necessary to create an agency.
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CONSIDERATION NOT NECESSARY

No consideration is necessary to create an agency. [section 185]. Thus, payment of agency commission is not essential to hold appointment of Agent as valid.

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Authority of agent
An agent can act on behalf of Principal and can bind the Principal.

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AGENTS DUTY TO PRINCIPAL


An agent has following duties towards principal. * Conducting principals business as per his directions * Carry out work with normal skill and diligence * Render proper accounts [section 213]. * Agents duty to communicate with principal [section 214]
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AGENTS DUTY TO PRINCIPAL (continued)


* Not to deal on his own account, in business of agency [section 215]. * Agents duty to pay sums received for principal [section 218] * Agents duty on termination of agency by principals death or insanity - [section 209].

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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.

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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.
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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.
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MEANING: QUASI CONTRACT


In special circumstances, obligations resembling those created by a contract are imposed by law although the parties have never entered into a contract. Such obligations imposed by law are referred to as Quasi contracts or Constructive Contracts under the English law, and certain relations resembling those created by18 18

DEFINITION:
According to Indian Contract Act 1872, Quasi contract is a transaction in which there is no contract between the parties, the law creates certain rights and obligations between them which are similar to those created by a contract.
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CHARACTERISTICS:
Not made by the desire of the

parties but are created by law of the land. No agreement at all between the parties. The contracts came into being after a party has received a profit or money. 20
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DIFFERENCE BETWEEN
BASIS SIMPLE CONTRACTS Essential IMPLIED CONTRACTS Not essential

1. Proposal and its acceptance 2. Obligations

Arise as soon as contract is made

Created by operation of law

3. Receiving profit or No existence of profit money or money.

It arises when a party has received a profit or money. 21 21

TYPES OF IMPLIED CONTRACTS:


Supply of necessities to persons incompetent to contract: According to Section 68, If a person incapable of entering into a contract, or any one whom he is legally bound to support, is supported by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.
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Interest in payment due by another:

According to Section 69, A person who is interested in the payment of money which another is bound by law to pay, or who therefore pays it, is entitled to be reimbursed by the other.

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Voluntary but non- gratuitous acts:

As per Section 70, When a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or 24 delivered.
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Responsibility of finder of goods:

According to Section 71, A person who finds goods belonging to another, and takes them into his custody, is subject to te same responsibility as a bailee.

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Payment of money or delivery of goods by

mistake or under coercion: According to Section 72, A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it to the person who paid it by mistake or under coercion.
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Meaning of Minors Partnership


According to section 11 of contract Act, a minor is incompetent to contract. Therefore a minor can not become a partner in the firm. According to section 30 of the Act, a person who is minor can not be a partner in a firm and also cannot be entered into partnership deed as a full fledged partner. According to the second part of the section 30, a minor may be admitted only to the profits or benefits of the partnership. The guardians of the minor enters into an agreement with others partners on behalf of the minor. A minor cannot be made a party to the liabilities of the firm under any circumstances. A partnership firm cannot be formed with only minor person as partners. There should be at least two major partners before a minor is admitted.

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Rights of a Minors
1. To share profit 2. To have access to accounts 3. To sue 4. To elect to become a partner 5. To elect not to become a partner

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Liabilities of a Minor
1. His share 2. Personal liability 3. Partner by holding out

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Thank You
Prepared by: Jignesh Sutariya edit Master subtitle style Vikas Khoyani Click to Dharmin Bhikadiya Sahil Sherasiya

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