Agency

Prashna Samaddar
 Basics
• Section 182- who are Agent and Principal??
• Section 183- who can employ an agent?
• Any person-who is of the age of majority; who is of sound mind; as per the laws of his subjectivity.
• Section 184-who can be an agent?
• Any person- person-who is of the age of majority; who is of sound mind; as per the laws of his subjectivity and
has accepted the responsibility towards principal.
• Section 185- consideration is not necessary to create an agency.
• Agents’ Authority- 1) creation (S. 186)[may be express or implied]
2) definition (S.186)[express-when it is given by words spoken and/or written; implied- when it is to
be inferred by the circumstances or the ordinary course of dealing]
3) extent(S.188,189) [authority to do any lawful act or every lawful thing necessary for the ordinary
course of business, which is necessary in order to do such act; or to accomplish such business activities] [In an
emergency, the agent has authority to do all such acts for the purpose of protecting his principal from loss as would be
done by a person of ordinary prudence, under similar circumstance, in his own case.]
• Fiduciary relation between Agent and principal- Agency imposes a higher duty than simply to abide by the contract
terms. It imposes a fiduciary duty. The law infiltrates the contract creating the agency relationship and reverses the
general principle that the parties are free to act in the absence of agreement. As a fiduciary of the principal, the agent
stands in a position of special trust. His responsibility is to subordinate his self-interest to that of his principal. The
fiduciary responsibility is imposed by law. The absence of any clause in the contract detailing the agent’s fiduciary duty
does not relieve him of it.
Kinds of Agents-
• Del Credere Agent- is an mercantile agent who for extra commission takes responsibility of that
person with whom he contracts on behalf of the principal will perform their contract.
• Pakka Adatia- Is an agent to whom goods are handed over by principal and then the actual sale of
the goods become the agent’s own affair. He may contract as a principal rather than a agent.
• Factor- a mercantile agent who is entrusted with the possession of the goods for the purpose of
sale. The sale may be proceeded by him on credit basis.
• Broker- an agent who has authority to negotiate the sale or purchase of goods on behalf of his
principal. He himself gets no possession of the property for which he negotiates.
• Auctioneers- an agent who has authority to sell the property at a public auction. He initially being
the agent for the owner becomes the agent of the buyer once the sale proceeds gets executed.
• Creation of Agency- 1) By express agreement (Sec.186)
2) By implied agreement (Sec.187)
-by estoppel; by holding out; by necessity
3) By ratification (196-200)
4) By operation of law
 Ratification (Ss.196-200)/Delegation (Ss.190-195)
• Sec 196- By ratification, it is meant to accept the action done or undertaken on his/her behalf without
his/her knowledge or consent. S.196, provides right to an individual to ratify or disown an action
undertaken in such manner. If one accepts, he becomes the principal. (Effect of ratification)
• Ratification may be express or implied.(S.197); however no ratification may arise from a person whose
knowledge to the fact to which ratification is being given is incomplete, wrong or defective. (S.198)
• Ratification has to happen for the whole transaction, it can’t be only for the authorised acts done.
However, if such unauthorised act leads to any damage or tends to terminate any right or interest of a
third party; the same can’t be ratified. (Ss. 199;200)
• Delegation of Agency – “delegatus non potest delegare”- one which is once delegated can’t be
delegated further. In other words, an agent can’t employ a sub-agent or substitute him with someone
else to get the work done for which her has been entrusted by his principal. S.190 envisages this
principle in the first place, but gives position to sub-agency in the same provision as well. However,
exception to the rule is provided under- Ss.191-194. Later section deals with substituted agency as well.
• S.191- a sub-agent is a person employed by and acting under the control of the original agent, if;
A) by custom of trade allows such appointment; and/or,
B) such appointment is necessary for the nature of work. ( In addition, if the principal is desirous of such
appointment and/or is aware of such appointment by the agent and doesn’t object to the same, can also
be grounds of inclusion of a sub-agent)
Delegation (contd..)

• Extent of sub-agency- a) A principal is bound by all kinds of representation by the sub-agent if the
appointment is proper; b) agent is responsible and answerable to each acts of a sub-agent and, c) a sub-
agent is responsible for all his acts directly to the agent but not to the principal except in cases of fraud and
wilful wrongs. (S. 192)
• Agent’s responsibility for improper appointment- In case a sub-agent is appointed without proper
powers/authority in the hands of the agent, he is liable for every action of the sub-agent so appointed and
will act as a principal in an agency relationship with the third party wherein the sub agent has been so
appointed. (S.193) In such cases of improper appointments; the original principal is neither responsible nor
accountable for any actions of that sub-agent.
• Co-agent /Substituted Agent- such an agent can be appointment by the original agent, if he has such
authority (express/implied) to do so and has done that for the benefit of the agency. That appointment can’t
be treated as a sub-agent in any manner and hence has the same authority as to the original agent and also
has the same answerability directly to the principal.
• A substituted/co- agent can be selected for the entire business or for the whole of it as per
circumstance. And while selecting such an agent, he must have shown proper discretion and prudence
of normal humans, if done that, he is not responsible for the actions of such an agent. (Ss.194-195)
Duties and liabilities-

Agent towards Principal Principal towards Agent

• Ss. 222&223- An agent is always eligible to indemnified for
• S.211- An agent is bound to do the principal’ business as
all reasonable expenses and lawful acts done by him
per given instructions and where no such instruction is
during the conduction of business and by virtue of the
given, as per custom of such business to be conducted in
authority given to him. He is also eligible to be indemnified
such place. For any otherwise situation, he must be held
by the employer for all the acts done in good faith even if
liable.
it causes injury to the third party. However no liability
• S.212- An agent is bound to do the business as per the arises, in case the agency is created to do a criminal act
general skill and diligence required for that business, unless has been the subject matter. (S.224)
principal has every reason to know his inability. In cases of
• S.225- An agent is eligible to be compensated for any
neglect and or misconduct due to such want of skill, he
injury caused to the agent for Principal’s neglect or want
must compensate the principal but not for those which are
of skill.
remotely happening due to his want of a special skill and
diligence. • S.226- A contract entered into by an agent is equivalent
and enforceable by all means as it would have been in case
• S.213- An agent is bound to render proper accounts to his
would have been entered into by the principal.
principal on demand.
• S.229- any notice or any information between the third
• S.214- An agent is bound to use all diligence in
party and principal will be treated as coming from the
communicating the principal and take his permission w.r.t
principal only if done in the ordinary course of authorised
work to done in regards to the business and take
business by the agents.
instructions.
Contd…

Agent towards Principal Principal towards Agent

• S.215- A principal may repudiate any transaction created
by the agent in case it is done without his consent or • Ss. 217, 219, 220, 221- An agent has every right to
authority and is turning out t be disadvantageous and retain such profit proceeds and income form an
malicious for him. agency which has been required to be invested by
him for the proper conduction of the business.
• Ss.216&218- An agent is accountable to proceed every However, any normal timely payment may be done
profit and forward every payment which he earns out of by the principal and its absence may only create such
any business done by him in an agency under the right. But is no way responsible for any business
authority of the principal, to the principal only. misconduct during such agency. He also has right to
• Ss. 227 & 228- If an agent does an act which is beyond his lien on any or every moveable or immoveable
authority given by the principal and is separable form the property for recovering the due amount of his for
chief duty, the principal is only bound by the chief duty any of his commission, disbursement or service.
given initially, unless otherwise provided. However, if the Rights of third party-
actions are inseparable and are conducted outside the As per, S.233; A third party may hold, either the
scope of his (agent’s) authority, the principal is not bound
by the entire transaction. principal or the agent or both of the liable for any
• S.230- An agent can’t personally enforce a contract damage caused to him during the continuance of
entered into by him on behalf of the Principal. However, agency.
such contractual enforcement can be presumed in case;
• A) the principal stays abroad; As per S.235; A third party is eligible to be
• B) the principal is undisclosed; or compensated by the agent who is pretending to be so
• C) the principal though disclosed, can’t be sued. and whose acts are not ratified by the principal who
was untruly represented by the Agent.
Revocation/Termination of Agency: (Ss.201-210)
• S. 201,203- Termination of agency under following grounds may happen-
A) BY revoking principal’s authority on his own,
B) BY the agent renouncing the business,
C) BY the completion of the business,
D) BY either death or insanity of principal or/and agent,
E) BY Insolvency of the principal,
F) BY the principal before any action of agent binds him to the contract.
• When revocation or termination is not possible?? Ss. 202&204- as per these sections, if the agent has any interest
vested in the subject matter of the contract of agency, it can’t be revoked unless otherwise mentioned in the
contract which would prejudice his interest so vested and if there is a partial execution of the agent’s authority has
taken place, the contract to the extent of execution can’t be revoked.
• Notice and compensation of revocation or renunciation of agency- Ss. 205;206;207- Any revocation or renunciation
without sufficient cause before the maturity of con
• Completion of termination- S.208; provides that; termination of agency takes effect only when it is known to the
agent and to the third party involved in the concerned contract of agency.