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MB0051 Unit 05 Contract of Agency

MB0051 Unit 05 Contract of Agency

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Published by: Sensorica Evanescere on Sep 19, 2011
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Unit-05-Contract of Agency
 5.1 IntroductionObjectives5.2 Agent and Agency (Sec.182)Who can employ agent?Who may be agent?5.3 Kinds of AgenciesExpress agency (Sec.187)Implied agency (Sec.187)Agency by estoppel (Sec.237)Agency by holding outAgency of necessity (Sec.189)Agency by ratification (Secs.196-200)Agency coupled with interest5.4 Classification of AgentsSpecial and general agentsMercantile or commercial agentsNon-mercantile or non-commercial agentsSub-agent and substituted agent (Secs.190-195)5.5 Duties and Rights of AgentDuties of agentRights of agent
5.6 Principal‟s Duties to the Agent and
his Liability to Third PartiesDuties of a principalLiability of principal to third partiesUndisclosed principal
Concealed principal5.7 Personal Liability of Agent5.8 Termination of AgencyCircumstances under which agency terminates or comes to an end (Sec.201)When termination of agency takes effect?5.9 Power of AttorneyMeaningA power of attorney may be special or generalRegistration5.10 Summary5.11 Terminal Questions5.12 Answers5.1 IntroductionIn the previous units, you came to know about the bailment and guarantee of contract. Inthis unit you will study about the contract of agency.Before the Industrial revolution, business was carried on largely by individual artisans intheir homes and in small family operated shops. As population and trade expanded anddivision of labour and specialisation became the order of the day, there arose the problemof distribution of goods. To meet the rising demand, manufacturers and shopkeepers
began to hire others to work for them. These helpers or “servants” as they were called
performed whatever physical tasks were assigned to them, under the close personal
supervision of the “master”. The Indian Contract Act, 1872, makes provisions as regards
agency. Secs.182 to 238 deal with the subject of agency.ObjectivesAfter studying this unit, you should be able to:· Define agent· Describe the types of agencies· Explain the duties and rights of agent· Explain the power of attorney5.2 Agent and Agency (Sec.182)
Agent is “a person employed to do any act for
another or to represent another in dealings
with third person”. Thus, agent is a person who acts in place of another. The person for
whom or on whose behalf he acts is called the Principal. For
, Anil appointsBharat, a broker, to sell his Maruti Car on his behalf. Anil is the Principal and Bharat is hisagent. The relationship between Anil and Bharat is called Agency. This relationship isbased upon an agreement whereby one person acts for another in transaction with a thirdperson.5.2.1 Who can employ agent?Any person who is of the age of majority according to the law to which he is subject andwho is of sound mind, may employ agent (Sec.183). No qualifications as such areprescribed for a person to be agent except that he has attained majority and is of soundmind. Thus, a minor or a lunatic cannot contract through agent since they cannot contractthemselves personally either. If agent acts for a minor or lunatic, he will be personallyliable to the third party.5.2.2 Who may be agent?Since agent
is a mere connecting link or a „conduit pipe‟ between the principal and the
third party, it is immaterial whether or not the agent is legally competent to contract.Thus, there is no bar to the appointment of a minor as agent. However, in considering thecontract of agency itself (i.e., the relation between principal and agent), the contractualcapacity of the agent becomes important. Thus, no person who is not of the age of majority and of sound mind can become agent, as to be responsible to his principal(Sec.184).
Rahim appoints Kiran, a minor, to sell his car for not less than Rs 90,000. Kiransells it for Rs 80,000. Rahim will be held bound by the transaction and further shall haveno right against Kiran for claiming the compensation for having not obeyed theinstructions, since Kiran is a minor and a contract with a minor is void abinitio.Self Assessment Questions1. A substituted agent is as good agent of the agent as a sub-agent. (True/False)
2. A principal can always revoke agent‟s authori
ty. (True/False)5.3 Kinds of AgenciesA contract of agency may be created by an express agreement or by implication (impliedagreement) or by ratification. Thus, there are different kinds of agency.5.3.1 Express agency (Sec.187)A person may be appointed as agent, either by word of mouth or by writing. No particularform is required for appointing agent. The usual form of a written contract of agency isthe power of attorney on a stamped paper.5.3.2 Implied agency (Sec.187)Implied agency arises from the conduct, situation or relationship of parties. Impliedagency, therefore, includes agency by estoppel, agency by holding out and agency of necessity.

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