Contracts of Agency

INC
GUNTUR
GURU PRASAD.P
LEGAL ENVIRONMENT OF BUSINESS
Contracts of Agency
 Sec 182 of the Indian contract
act,1872 defines Agent and
Principal as:
 Agent means a person employed
to do any act for another or to
represent another in dealing with
the third persons and
 The principal means a person for
whom such act is done or who is so
represented.
Contracts of Agency
 An agent does not act on his own
behalf but acts on behalf of his
principal. He either represents his
principal in transactions with third
parties or performs an act for the
principal. The question as to
whether a particular persons is an
agent can be verified by finding out
if his acts bind the principal or not
Creation of agency

 Any person who is of the age of majority

and is of sound mind may employ an
agent.(section183)
 Between the principal and the third
persons, any person may become an
agent. But no person who is a minor and
of unsound mind can become an
agent.(184)
 No consideration is necessary to create an
agency.(185)
 It is not essential that a contract of
agency be entered in to. It is sufficient if
a person acts on behalf of another and is
accepted by the latter.
Creation of agency
 An agency can be created either in
writing or orally. An oral
appointment is a valid
appointment even though the
contract of agency by which agent
is authorized has to be in writing.
 Creation of Agency
3. Express Agreement
4. Implied Agreement
Types of Implied Agency
 Agency by Estoppel or Holding out
 Agency by Necessity
 Agency in Emergency
 Agency by Ratification
Types of Mercantile Agents
 Factor
 Commission agent
 Del credere Agent
 Broker
 Auctioneer
RIGHTS AND DUTIES OF PARTIES
 Duties of Agent
 An agent is bound to conduct the business of his
principal according to the directions given, or in
the absence of directions, according to the
custom.
 An agent is bound to conduct the business of the
agency with as much skill as is generally
possessed by persons engaged in similar business
unless the principal has notice of his want of skill.
 An agent is bound to render proper accounts to
his principal, and has duty, irrespective of any
contract to that effect, to produce vouchers by
which items of disbursement are supported as
part of the obligation to render proper accounts to
the principal on demand.(section213)
RIGHTS AND DUTIES OF PARTIES

 It is duty of an agent in cases of difficulty,

to use all reasonable diligence in
communicating with his principal and
seeking to obtain his instruction
(section214)
 An agent should not set up an adverse
title to the goods which he receives from
the principal as an agent.
 An agent is duty bond to pay sums
received to the principal on his account.
RIGHTS AND DUTIES OF
PARTIES
 An agent must not use confidential information
entrusted to him by his principal for his own
benefit or against the principal.
 The agent must not make secret profit from the
extract agency. He must disclose any extra profit
that he may make.
 An agent must not allow his interest conflict with
his duty. For example, he must not compete with
his principal.
 An agent must not delegate his authority to a
sub-agent . This rule is based on the principle
Delegatus non protest delegare a delegate
cannot further delegate(section190).
RIGHTS OF AGENT
 The agent has a right to retain any sums
received on account of the principal in the
business of the agency, all moneys due to
himself in respect of his remuneration and
advances made or expenses properly
incurred by him in conducting such
business.
 The agent has a right to receive
remuneration.
 Right of lien: In the absence of any
contract to the contrary, an agent is
entitled to retain goods, papers and other
property.
RIGHTS OF AGENT
 The employer of an agent is bound to indemnify
him against the consequences of all lawful acts
done by such agent in exercise of the authority
conferred upon him.
 Where he has bought goods for his principal by
incurring a personal liability, he has a right of
stoppage in transit against the principal, in
respect of the money which he has paid or is
liable to pay.
 Where he is personally liable to the principal for
the price of the goods sold, he stands in the
position of an unpaid seller towards the buyer and
can stop the goods in transit on the insolvency of
the buyer.
RIGHTS OF PRINCIPAL
 Right to repudiate the Transaction
 To claim any resulted benefit from
Agency
 Right to Recover Damages
 To Resist Agent’s claim for
Indemnity
DUTIES OF PRINCIPAL
 To indemnify against consequences
of all lawful acts of agent
 To indemnify the agent against
consequences of acts done in good
faith
 To pay compensation against
agent’s injury
 To pay the agent the commission or
other remuneration agreed.
TERMINATION OF AGENCY
 According to section 201, an agency is
terminated by:
 By an agreement between the parties, or
 By the principal revoking his authority; or
 By the agent renouncing the business of
agency; or
 By the business of agency being
completed; or
 By either the principal or the agent dying
or becoming of unsound mind; or
TERMINATION OF AGENCY
 By the principal being adjudicated
an insolvent under the provisions of
any Act for the time being in force
for relief of insolvent debtors.
AGENCY MAY BE TERMINATED
BY
 Agreement
 Revocation of authority by the
principal
 By operation of Law
By operation of Law

 On performance of the contract. Where an agent

is appointed to perform a specified transaction,
his authority comes to an end on the completion
of the said transaction.
 On expiry of time.
 When the agent or the principal dies or becomes
of unsound mind. The death of the agent
terminates his authority.
 The death of one of the joint agents will terminate
the agency only as far as he is concerned, while it
will continue to be valid as regards the other
surviving agents in the absence of contrary
intention.
BY OPERATION OF LAW
 On the insolvency of the principal
 On the destruction of the subject
matter.
 On the principal becoming an alien
enemy.
 On the dissolution of a company.
 On termination of sub-agent’s
authority.
 EXCEPTIONS

 Irrevocable Agency:- When an agency

cannot be put an end to, it is said to be
irrevocable agency. An agency is irrevocable
where the agent himself has an interest in
the property which forms the subject-matter
of the agency.
 Time when Termination takes Effect:-
The termination of the authority of an agent
does not, so far as regards the agent, take
effect before it becomes known to him. As
regards third persons, it terminates when it
comes to their notice.