GOPALDAS JHAMATMAL ADVANI LAW COLLEGE,

BANDRA MUMBAI-400050

RIGHTS AND DUTIES OF AGENT

Submitted by:
KINJAL VINOD SOLANKI
Roll Number:
50
Division:
A
Class:
S.Y.L.L.B
Semester:
IV
Subject:
Contract Law-II
Submitted to:
Prof. Neha Shroff
INTRODUCTION:
In a contract of agency, the principal appoints an associate agent to perform some specific task
or business on his behalf. The principal is sure by the acts of his agent and is, therefore, liable
for his acts to the third parties, allow us to currently perceive the Rights and Duties of Agents.
An associate agent may be a person utilized to try and do any act for one more or to represent
another in addressing third persons.

The person, for whom such act is completed or thus depicted, is termed the “principal”.
The contract between Principal and Agent is termed Contract of Agency as Rights and duties
of the Agent area are unit reminiscent of the duties. The agents are distinguished in respect of
authority as general or special agents. the previous expression includes brokers, factors,
partners, and every one person utilized in an exceedingly business of filling a foothold of a
typically recognized character, the extent of authority being apparent from the character of
employment or position; the latter denotes associate agent appointed for a selected occasion or
purpose, restricted by the utilization, the agent has authority to try and do some explicit act for
a few big day or purpose that isn't at intervals the standard course of his business or profession.
This distinction is formed to see the authority of that agent.
OBJECTS:
 The following research work has been done to gain a deeper understanding at the
concept of agency and agent-principal relationship.
 The research work helped to gain knowledge about the various rights of the person
acting as an agent of the principal which can be exercised by him lawfully.
 Various moral obligations of the agent are also covered under this research work.
An agent is defined under Section 182 of the Indian Contract Act, an “agent” is a person
employed to do any act for another, or to represent another in dealing with third persons. The
person for whom such act is done, or who is so represented, is called the “principal”.
The contract between Principal and Agent is called ‘Contract of Agency’. In a contract of
agency, the principal appoints an agent to perform some specific task or business on his
behalf. The principal is bound by the acts of his agent and is thus, responsible for his acts to
the third parties

(I)Types of Agents

1. Special Agent- Agent appointed to do a singular specific act.

2. General Agent- Agent appointed to do all acts relating to a specific job.
3. Sub-Agent-An agent appointed by an agent.
4. Co-Agent- Agents together appointed to do an act jointly.
5. Factor- An agent who is remunerated by a commission (one who looks like the apparent
owner of the things concerned)
6. Broker- An agent whose job is to create a contractual relationship between two parties.
7. Auctioneer- An agent who acts a seller for the Principal in an auction.
8. Commission Agent- An appointed to buy and sell goods (make the best purchase) for his
Principal
9. Del Credere- An agent who acts as a salesperson, broker and guarantor for the Principal.
He guarantees the credit extended to the buyer.

(II)Authority of an Agent:
(a)Express authority: According to Section 187, the authority is said to be express when it is
given by words spoken or written.
(b)Implied authority: According to Section 187, authority is said to be implied when it is to
be inferred from the facts and circumstances of the case. In carrying out the work of the
Principal, the agent can take any legal action. That is, the agent can do any lawful thing
necessary to carry out the work of the Principal. Implied authority is of four main types:

 Incidental authority
 Usual authority
 Customary authority
 Circumstantial authority
(III)Rights of agent
Indian Contract Act gives certain rights and places some obligations for the agent
1. Rights of Retainer
As per Section 217 of the Indian Contract Act. “Agent’s right of retainer out of sums received
on principal’s account, an agent may retain, out of any sums received on account of the
principal in the business of the agency, all money due to himself in respect of advances made
or expenses properly incurred by him in conducting such business, and also such
remuneration as may be payable to him for acting as an agent.”
i.e, under this section, the agent has the right to hold or retain the money accrue to an agent in
due course of conducting a business act as guided by the principal. The agent can retain
money to clear the dues of the remunerations also. The Condition of this act says, the
expenses incurred to an agent for which he is retaining money must be arising in course of
business-related work and as guided by the principal.

 Relevant Case Law: LEIBOAK SYNDICATE V. FINLAY FLEMING &

COMPANY1
-This case is considered as the case for the evolution of the right of retainer. In this
case, the first time the court held that the agent has the right to retain the money or
goods as a retainer. It was also held that the agent is liable to answer all the questions
of the principal including why the explanation of money or goods the agent holds S. if
the agent satisfies with his claim to retain the goods or money of the principal, he can
hold or retain the goods or money until all claims/dues satisfy.

2. Rights of Remuneration
Section 219 of the Indian Contract Act, 1872 states an agent must get the remuneration as
agreed by the principal and the agent at the time of making the contract. For instance, if there
is no agreement between the principal and agent for specific remuneration, then reasonable
remuneration should be given to the agent for the services rendered by him. The agent can get
the remuneration if the services provided by him are involuntary or gratuitous. However, the
agent will be able to get the remuneration only if he completes the assigned work. When the
right to decide the remuneration is left at the discretion of the principal, then also the
reasonableness would be applicable.
Section 220 of the Indian Contract Act, 1872 states that the agent is not entitled to
remuneration for the misconduct of the business. It means that the agent will lose his right to
claim remuneration if an agent is found guilty of the fraud or breach. Along with this, he will

1
AIR 1923 Ran 84
be liable to the principal for the compensation of loss or harm caused due to the breach of the
duty.

 Relevant Case Law: KHURSHEED ALAM V. ASA RAM2

-In this case, the plaintiff was Khursheed Alam and the defendant was Asa Ram.
The plaintiff was a broker of the defendant. The defendant appointed him to sell
property, which was located in Lahore, to any buyers and agreed to pay commission
for that work. The defendant told the plaintiff to search for another buyer for the other
land. Meanwhile, the plaintiff had sold his property to his brother. The defendant
refused to pay the commission to the broker as the defendant thought that the land
was purchased by the plaintiff himself.
The issue that was raised in this case was about the reasonable payment that needs to
be given by the principal to the agent. The court held that the agent would get proper
compensation as this case doesn’t have a written contract. Also, the buyer of the land
was the plaintiff’s sibling but not the plaintiff. So, the plaintiff i.e. broker would get
the remuneration or payment for his services.

3. Right of Lien
The term lien has been described as the right of a man to retain certain goods that he
possesses, belonging to another, until certain demands of the person who possesses the goods
are not satisfied.
Section 221 of the Indian Contract Act provides for the right of lien that an agent has on the
principal’s property. An agent is well within his rights to retain the movable or immovable
property of the principle until he is compensated or accounted for his services relating to the
property that he was provided with. The movable and the immovable property might include-
goods, paper, house, etc. Services here encompass commission, disbursements, and services
relating to the property that he had been provided with by the principal
The right of lien is an important right that has been granted to agents in order to protect their
interests. However, it is not absolute. The exercise has some caveats and restrictions. In the
event of a breach of these restrictions and caveats, the protection that the right provides is
lost.
An agent could lose his right of lien in the following ways-

 The right to lien arises under the precondition of possession. Once possession of the
property is lost, the right to lien remains infructuous. The agent loses possession of
the property of the principal as soon as he delivers his property or instructs a carrier to
deliver it to him.

 Right of lien stands infructuous in the event of the agent waiving off the right. The
said waiver might arise as a result of an agreement implicit or explicit. It could also be
waived off through conduct inconsistent with the right.

2
AIR 1933 Lah 784
  Section 221 of the Indian Contract Act provides that the right of lien exists only if the
contract of agency does not have a clause to the contrary. If the agent after taking due
consideration decides to enter into an agreement with the principal to exclude the
right of lien it stands infructuous.
4. Right to indemnity
The agent must be indemnified against consequences of lawful actions. Indemnity means
promising to make good the loss. According to section 222 of the Indian Contract Act, the
employer of the agent has to indemnify him in the exercise of authority conferred on him
against the consequences of all legal acts performed by that agent.
For example: Suman appoints Rama for the selling of some goods, here Rama worked as an
agent for Suman. Rama sold those goods to Tej on the behalf of Suman but after7 days of
sale Tej came to know that those goods don’t belong to Suman. Here in this case if a third
party sue for this act, Rama is liable to pay compensation, reimbursement, and
indemnification for such deed which she performs in good faith.

 Relevant Case Law: KISHAN LAL V. BHANWAR LAL3,

-The plaintiff was an agent both at Jodhpur and Indore within the name of “Kanmal
Surajwal and Kanmal Kishwnmal” respectively and thus the defendant entered into
several contracts for the acquisition and sale through the plaintiff firm at Indore. The
transaction proved unprofitable to the defendant and except a little profit of Rs 103
jackfruit and every one of the rest transaction led to loss and loss aggregated to the
sum of Rs 21423, plaintiff paid the number to 3rd party on behalf of defendant and
plaintiff receive altogether sum of Rs 11457 which defendant paid from time to time.
So, the defendant now is liable to pay RS 9861. The plaintiff doesn’t file the suit
related to the business but he asked for the reimbursement of all the expenses and the
losses that he had incurred while working as an agent for the defendant. This suit
wasn’t related to the sale and buy of bullion, it had been suited by an agent claiming
for losses and expenses incurred by him on behalf of the defendant.
The judgment which was passed in the above-mentioned case held that the agent is
applicable for receiving compensation of his expenses and losses which he incurred
during the business for which he was appointed by the principal.

3
1954 AIR 500
 5. Right to Compensation
According to section 225, Subject to the contract terms with the Agency, an Agent may claim
compensation, whether general or particular, for damages above pay. The ‘immediate and
proximate’ consequences of the breach of the contract create widespread damage.
Usually, compensation may be provided for loss or harm, which may be connected directly or
nearly to the contract breach. One way of determining damages is to differentiate the contract
price from the market price the day before the contract infringement, plus reasonable
expenses incurred due to the breach plus court costs. Special damages or consequences will
arise in the event of extraordinary circumstances. Such effects may only be granted if the
persons infringing have the specific circumstances predicted or expressly known to them.
Section 225 follows, the principal must compensate his agent for the injury caused to that
agent by the principal’s neglect or lack of ability to do so.
(IV) Duties of an Agent:
1) Agent’s duty in conducting principal’s business-
As per section 211, an agent is bound to conduct the business of his principal according to the
directions given by the principal, or, in the absence of any such directions, according to the
custom which prevails in doing business of the same kind at the place where the agent
conducts such business. When the agent acts otherwise, if any loss be sustained, he must
make it good to his principal, and, if any profit accrues, he must account for it.

2) Skill and diligence required from agent-

As per section 212, 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. The agent is always bound to act with reasonable diligence, and to
use such skill as he possesses; and to make compensation to his principal in respect of the
direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss
or damage which are indirectly or remotely caused by such neglect, want of skill or
misconduct.

3) Duty to render proper accounts-

According to Section 213 of Indian Contract Act 1872, an agent is bound to render proper
accounts to his principal on demand.

4) Duty to communicate with principal-

According to section 214, it is the duty of an agent, in cases of difficulty, to use all reasonable
diligence in communicating with his principal, and in seeking to obtain his instructions.

5) Not to deal on his own Account-

Section 215 of the Indian Contract Act 1872 deals with right of principal when agent deals,
on his own account, in business of agency without principal’s consent.

6) Not to make Secret Profit-

Section 216 of Indian Contract Act, deals with Principal’s right to benefit gained by agent
dealing on his own account in business of agency. An Agent, without the knowledge of his
principal, should not deal in the business of agency on his own to make secret profit.

7) Duty to pay sums received for principal

According to Section 218 of the said Act, An agent is bound to pay to his principal all sums
received on his account.

8) Not to Disclose Secret:

It is duty of an agent to maintain secrecy of the business of agency and should not reveal the
confidential matters.

[V] RELEVANT CASE LAWS:

1-PANNALAL JANKIDAS V MOHANLAL4
Facts: Plaintiffs, as agents of the defendants had stored the goods in Government godowns,
requiring permit to supply them to the defendants. In the meanwhile, due to the fire in
godown, the goods got burned up and plaintiffs got compensation of 50% of damage caused
in respect of the goods as they were uninsured. However, plaintiffs sued defendants to be
indemnified against the rest 50% of damages caused to the goods while handling those as
latter’s agent. The defendants pleaded, and it was found as a fact that plaintiffs had agreed to
insure the goods and even charged defendants, nevertheless omitted to insure the goods; they
further pleaded that they were entitled to set off or counter claim for the value of the goods
destroyed as damages caused to them by the neglect or breach of duty of the plaintiff
Issues: What damages are plaintiffs liable to pay to the defendants for failure to
insure the goods which were destroyed?
Held: The Supreme Court held that “where the agent who was asked by the principal to get
the goods insured and in fact charged the premium from the principal but never got the
insurance, was held liable to compensate the principal when the goods were lost in an
explosion.”

2-JOHN V PHILIP5
In John v Philip, it is held that “an estate agent cannot make a contract with a third party that
would be binding upon his principal.”

3-YASUDA FIRE AND MARINE INSURANCE CO. V. ORION MARINE

INSURANCE UNDERWRITING AGENCY LTD.6
It was held that “the obligation to provide an accurate account in the fullest sense arises by
reason of the fact that the agent has been entrusted with the authority to bind the principal to
transactions with third parties and the principal is entitled to know what his personal
contractual rights and duties are in relation to those third parties as well as what he is entitled
to receive by way of payment from the agent”.

4
AIR 1951 SC 144
5
AIR 1988 KER 122
6
1995 4 Re LR 217
CONCLUSION
From the above discussion it follows that an agent acting within the scope of his authority
confers rights and imposes liabilities of a contract upon the principal. Where the agent makes
a contract with a third person, acting on behalf of his principal, normally, the agent incurs no
personal liability under the contract so entered into. Further, the agent also does not acquire
contractual rights. That is, the contracts entered into through an agent and obligations arising
from acts done by an agent may be enforced in the same manner and will have the same legal
consequences, as if the contracts had been entered into and acts done by the principal in
person.
BIBLIOGRAPHY
The above research work has been done with the reference of various websites which has
been listed below:

 https://blog.ipleaders.in/rights-duties-agent/
 https://lawbhoomi.com/rights-duties-of-agents/
 https://www.lawyersclubindia.com/articles/right-of-lien-
2879.asp
 https://www.casemine.com/search/uk/v%2Borion%2Bmarine%
2Binsurance%2Bunderwriting%2Bagency