AGENCY

Agency is a contract whereby a person binds himself to render some

service or to do something in representation or in behalf of another, with
the consent and authority of the latter.
 Principal — the party who employs another person to act on his or her
behalf.
 Agent — the party who agrees to act on behalf of another.
 Agency — the principal/agent relationship.
It is “fiduciary” relation which result from the manifestation of consent
by one person that shall acts on former’s behalf and subject to control.
ELEMENTS OF AGENCY
1. Consent, express or implied.
2. The object is the execution of a judicial act in relation to a third
person.
3. Agent acts as a representative and not for himself.
4. Agent acts within the scope of his authority.
5. Parties must be competent to become an agent and principal

PRINCIPAL

hire THIRD PARTY

Agency
contract

AGENT

RELATIONSHIP BETWEEN PRINCIPAL, AGENT, AND THIRD PARTIES

1. Where the agent is contracting for a named principal and third party is fully
aware of agency, then, if the agreement is within the agent’s authority, or
has been ratified, the third party can sue the principal.
2. Where the agent discloses the existence but not the name of his principal,
the third party can sue the principal. But where an agent contracts in writing
and does not exclude his liability so that he appears to be personally liable,
he will be unable to relieve himself of liability by proving that he was
contracting as agent.
3. Where neither existence nor the identity of the principal is disclosed, the
doctrine of undisclosed principal arises. When the principal is discovered,
either the principal or the agent may be sued by the third party. The third
party cannot sue both principal and agent. He must make his choice between
them, and judgment obtained against one of them, bars proceedings against the
other.
 THE RELATIONSHIP OF PRINCIPAL AND AGENT IS KNOWN AS AGENCY.
It may be created in the following ways:
1. By express appointment - power of attorney, in writing or orally
2. By implication - here agency is inferred from the conduct of the
parties. E.g. husband and wife, in case of agency of necessity.
3. Agency by estoppels - The usual situation is where an employee is
allowed by his employer to order goods on his behalf and the goods
are afterwards paid by the employer. If the employee later goods
on the employer’s behalf from the same suppliers, the employer will
be liable to pay to for them as he will be stopped from denying
the employee’s ostensible authority.
4. Agency by ratification - this arises where A acts in the name of
B, without B’s authority. B may ratify the act and make it as valid
as if it had been done with his authority.
OBLIGATIONS OF THE AGENT
The obligations of the principal and agent may be laid down by
agreement. But in case the agreement does not provide for the
obligations, the following are imposed by law on every agent:
1. To carry out the work he has undertaken to do according to the
terms of agreement using ordinary skill and diligence
2. To acquaint his principal with all matters which come to his notice
in connection with the business at hand.
3. To keep proper accounts and to render them to his principal on
demand. He must hand over all money received intact unless there
are deductions for agreed remuneration and necessary expenses.
4. Not to delegate his duties to a sub-agent without authority express
or implied. The rule is: delegate has no authority to delegate.
5. Not to make any secret profit and take any bribe. In such
circumstances, the principal may dismiss the agent without notice;
to refuse to pay him commission and to recover the bribe.
6. Duty of obedience; in performance of the undertaking, the agent
must act in accordance with the authority given to him obeying all
lawful instructions from the principal.
7. Not to become principal as against his employer. This is part of
the more general duty that an agent must not let his interest
conflict with his duty.
8. Not to disclose confidential information or documents entrusted to
him by his principal.
RIGHTS OF AGENT
1. Right to receive remuneration
2. Right of retainer
3. Right of lien
4. Right to be indemnified against consequences of lawful acts
5. Right to be indemnified against consequences of acts done in good
faith
6. Right to compensation
OBLIGATIONS OF THE PRINCIPAL
1. To pay the agent agreed remuneration or commission and if so agreed,
necessary expenses as well
2. To indemnify the agent against any consequences of all things
lawfully done within the authority conferred upon him. The right
to indemnify is lost if the agent exceeds his authority or acts
negligently.
The duties of an agent are indirectly the rights of a principal and the
rights of an agent are indirectly the duties of a principal.

EXTINGUISHMENT OF AGENCY
The agency may be terminated by act of the parties or by operation of
law as follows:
1. By notice of revocation given by the principal to the agent
By revocation, a principal may revoke the authority of the
agent in the same manner in which the agent has the right of
renunciation. In case the revocation constitutes a breach of
contract of agency, the agent is entitled to claim compensation
from the principal.
2. By notice of renunciation given to the principal by agent.
3. By the completion of the transaction, where the authority was given
for that action only. E.g. n case of special agency.
4. By the expiration of the period stipulated in the contract of
agency
5. By mutual agreement, by which the principal discharges the agent
from further liability, in consideration for a reciprocal discharge
from the agent
6. By death, lunacy, or bankruptcy of the principal or agent