LAW OF AGENCY

CONTENTS

Definition of agency
Essentials of contract of agency
Classification of agents
Rights and duties of agents and principal
Creation of agency
Termination of agency
Definition of Agency

Law relating to Agency is contained in chapter 10 of

the Indian Contract Act, 1872 (sections 182 to 238).
Agency is a contractual relation between two parties
created by agreement express or implied.
The relationship of agency arises whenever one person
called Agent has authority to act on behalf of another
called Principal.
Essentials of contract of Agency
1. The relationship of an agency is based upon a
contract.
2. The contract may be either express or implied.
3. There should be the appointment of an agent by the
principal.
4. The person employing the agent must himself have
legal capacity or to be competent to do the act for
which he employs the agent.
5. The principal should confer authority on the agent
to act for him.
6. Relationship of the agency is based on confidence
between the principal and the agent.
7. A contract of agency requires no consideration
(sec 185)
Classification of Agents

1. On the basis of authority

.Express or implied agents
.General, specific or universal agents
.Agent or Sub-Agent

2. On the basis of nature of work

.Mercantile agent
.Non-mercantile agent
Classification of agents on the basis
of nature of work
Mercantile agents Non-mercantile agents

Banker Attorneys

Factor Solicitors

Broker Promoter

Auctioneer Wife

Commission agent Insurance agents

Del-Credere Clearing and forwarding agents

 RIGHTS,DUTIES AND LIABILITIES OF AN AGENT
Rights of an Agent:
1.An agent is entitled to receive agreed remuneration. In the absence of any special
contract, payment for the performance of any act is not due to the agent until the
completion of such act (Sec.219).

2.A agent may retain out of any sums received on account of the principal in the business
of agency, or all money due to himself respect of advance 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 (Sec.217).

3.the absence of any contract to the contrary, the agent is entitled to particular lien i.e.,
right to retain goods, papers (documents) and other property, whether movable or
immovable, of the principal received by him, until the amount due to himself for
commission, disbursements and services in respect of the same has been paid or
accounted for him (Sec.221).

4.Under certain circumstances, an agent can stop the goods in transit.

5.The employer of an agent is bound to idemnity him against the consequences of all
lawful acts done by such agent in exercise of authority conferred upon him. (Sec.222).

6.The principal must pay compensation to his agent in respect of injury caused to such
agent by the principals neglect or want of skill (Sec.225).
Duties of an Agent:

1. To follow the instructions of the principal.

2. To work with reasonable skill and diligence.
3. To render proper accounts.
4. To communicate with the principal in difficult situations.
5. Not to deal on his own account.
6. To pay all sums.
Duties conti..

Not to set up adverse title.

Not to delegate his authority.
Not to use agency information against Principal.
Agents duty on termination of agency by principals
death or insanity.
Not to put himself in position where interest and duty
conflict.
 PERSONAL LIABILITIES OF AN AGENT
General Rule(Sec.230): In the absence of any contract to that
effect, an agent cannot personally enforce contract entered into by
him on behalf of his principal, nor is he personally bound by them.
: Circumstances under which an Agent
becomes personally liable

In case of In case of In case of In case of

Foreign Undisclosed Incompetent Principal
Principal Principal Principal not in
(Sec.230) (Sec.230) (Sec.230) existence

In case of In case of
In case of In case of
acts not custom or
acts in his express
ratified usage of
own name agreement
(Sec.235) trade
 Misrepresentation and fraud by
Agents: Misrepresentation made or frauds committed,
by agents acting in the course of their business for their
principals have the same effect on agreements made by
such agents as if such misrepresentations or frauds had
been made or committed by the principals. But
misrepresentation made, or frauds committed, by
agents, in matters which do not fall within the scope of
authority, do not affect their principal (Sec.238).

Money received by agent by playing

fraud on third person: Where an agent received
the money from the third person by fraud and paid it to
the principal, the third cannot sue the principal unless
the latter aware of the fraud or had means of knowing
that it was the third persons money.
CREATION OF AGENCY
 Implied Agency: Includes
A. Agency by estoppel: An agency may be implied from
the conduct of the parties, though no express authority
has been given.
B. Agency by holding out: Where a person permits another
by a long course of conduct to pledge his credit for
certain purposes, he is bound by the act of such person
in pledging his credit for similar purposes.
C. Agency by necessity: sometimes extraordinary
circumstances require that a person who is not really
an agent should act as an agent of another.
AGENCY BY RATIFICATION

Ratification is a kind of affirmation or approval of a

previous unauthorised act or acts relating to a contract.
 TERMINATION OF AGENCY
Agency may be terminated in the same
manner as any other contract:

By the operation of law

By the acts of the parties
Termination of agency by acts of the
parties
1. By agreement between principal and
agent
2. By revocation of the agents authority by
the principal
3. By renunciation of business by the agent
Termination of agency by operating of law
1. By performance of the contract of agency
2. By efflux of time
3. By death or insanity of the agent or principal
4. By the insolvency of the principal and in
some cases that of the agent
5. By the destruction of the subject matter of
agency
6. Where the principal or the agent is an
incorporated company by its dissolution
7. By the principal becoming an alien enemy
Effect of Termination
As between the principal and the agent,
termination of agency is effective only
when it becomes known to the agent, but
so far as third parties are concerned,
termination of agency takes effect when it
is known to them
Irrevocable agency
When a agency cannot be terminated is
said to be an irrevocable agency
Power of Attorney
A Power of Attorney is an instrument or a
deed by which a person is empowered to
act for and in the name of the person
executing it. The person executing the deed
is known as the Principal or donor and the
one in whose favour it is executed is the
agent, or the power agent or the power of
attorney agent