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Contract of Agency:Agency is a special and different type of contract, this concept shows the limitations of human being, he is not always able to solve or do all issued by himself. Sometimes he should have an opportunity or facility to transfer his business through some others like an agent. By a contract of agency, a person employs another person to do any for him to represent him in dealing with third persons so as to bund himself by the acts of such another persons. The contract of agency is based on the following two general rules: 1. Whatever the principle can do by him, he may get the same done through an agent, except in case of personal nature of work. 2. What a person does by another, he does by him. Thus, the acts of the agent are the acts of the principal.

Agent: According to sec 182 of Indian law of contract, an agent is a person employed to do any act for another or to represent another in dealings with third persons. An agent is a connecting link between principal and the third party. Thus an agent establishes a contract between such another person and third person. According to section 184 of Indian law of contract, there are no essentials eligible criteria for appointment of Agent in any contract. It means a minor, or an unsound person may also be appointed as an agent. One thing is very clear that in case a non eligible person as an agent every authorized or unauthorized work will be the job of principal. Either principal is only responsible for authorized given task.

Principal: 1

According to section 182 of Indian law of contract, the person for whom such act is done, or who is so represented, is called the principal. Essentials elements of Agency: Generally in case of contract for agency there is a need of all elements of contract, like proposal, consent, free consent, legality of objectives etc. but according to section 185 there is no need of consideration for agency. Thus a contract of agency is an exception comes under section 25 of Indian law contract, which emphasis on the rules where without considering contract is valid. Agency can be established on the basis of remuneration to the agent.


Creation of agency: Agency can be created by following given modes: 1. Express Agency: - According to section 186 and 187, an express agency arises when an express authority is given to the agent by spoken or written words. Example: - X who owns a shop, appoints Y to manage his shop by executing a power of attorney in Ys favor. Here this relationship of principal and agent has been created between X and Y by an express authority. 2. Implied Agency: - an agency which has to be understood from the conduct and behavior of the parties is called implied agency. It is to be inferred from the circumstances of the case and things spoken or written, on the ordinary course of dealing may accounted as circumstances of the case. Example: - A owns a shop in shimla, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purpose of the shop and of paying for them out of A;s fund with As knowledge. Here B has an implied authority from A to order goods from C in the name of A for the purposes of the shop. Implied agency can be categorized in following given heads: Agency by estoppels: - it arises where a person by his words or conducts induces the third person to believe that a certain person is his agent. Then the person who induces as such is stopped from denying the truth of the agency.

Agency by holding out: - such types of agency arises when a person by his past affirmative or positive conduct leads third person to believe that person doing some act on his behalf is doing with authority. Example: - X allows Y, his servant to purchase goods for him credit from Z and later on pays for them. One day X pays cash to Y to purchase goods. But X misappropriates the money and then purchase goods on credit from Z. In this case now Z has the right to recover figure from X, because X has held out Z as his agent on earlier occasions. Agency by Necessity: - in certain given circumstances law confers an authority on one person to act as agent for another without any regard to the consent of such person, is called as agency by necessity: 1. Where there is some real necessity to act as such. 2. Where it is not possible for such person to communicate with such other person on whose behalf he acts.

3. Agency by Ratification: - according to section 196 it is said to arise when a person, on whose behalf the acts are done without his knowledge or authority given by principal, but after the task this acts are ratify expressly, or impliedly by the principal. So ratification is confirmation or approval of some unauthorized acts done by some other person.

Types of Agent: 1. Broker: - These are those who never take the possessions of the goods he only acts as a link between the buyer and seller and claims for commission for his efforts done for deal. Example: - Every king of Broking stock houses.

2. Factor: - Such agent takes actual possession of the goods on behalf of seller, then he deals with buyer to sell the goods, then he claims for his commission. Example: - Franchises and dealership of Nokia Cell phone or Cut ones. 3. Del credre Agent: - such agent gets extra commission called as Del credre commission, where he is responsible to recover of credit sale. 4. Auctioneer: - He is one who sells goods by inviting bids from general public. Liquidator is type of auctioneer

TERMINATION OF AGENCY Termination of Agency: An agency of contract is similar to the other contracts, it can be terminated by two following given points: 1. Acts by the parties 2. By operation of law Terminations by the acts of the parties: Here following given types are available: 1. Mutual agreement: - Contract of agency is created by a mutual agreement and it can also be terminated by a new agreement between the parties to contract with their mutual consent. 2. Lapse of time: - If the principal appointed the agent for a particular time slot, so at the end of specified time, contract of agency automatically got terminated.

3. Purpose achieved: - If principal appoints an agent for a particular purpose and when that purpose has been achieved, automatically got terminated. 4. By notice of revocation: - The principal may revoke the authority given by him to his agent by giving him a notice of revocation. Such revocation may be express or implied. The agent would not act as an agent from the date of such notice. However the principal would compensate the agent for the termination of agency without a proper notice, if any loss is caused to him. 5. Renunciation by the agent: - The agent has also the right to renounce his agency business by properly informing the principal. If he leaves without giving the proper notice then he also have compensate the principal for such loss.

Termination by operation of law: An agency is terminated by operation of law including: 1. Death of the principal or agent 2. If the principal or agent comes of unsound mind the agency relationship come to an end. 3. Bankruptcy of the principal 4. Impossibility of the performance 5. If the principal or the agent becomes an alien enemy, relationship of agent and principal got terminated because trading with enemy country is opposed to public policy.


According to sec 182 of Indian law of contract, an agent is a person employed to do any act for another or to represent another in dealings with third persons. An agent is a connecting link between principal and the third party. Thus an agent establishes a contract between such another person and third person. According to section 184 of Indian law of contract, there are no essentials eligible criteria for appointment of Agent in any contract. It means a minor, or an unsound person may also be appointed as an agent. One thing is very clear that in case a non eligible person as an agent every authorized or unauthorized work will be the job of principal. Either principal is only responsible for authorized given task.

Different concept of Agent: 1. Sub Agent: - A person appointed by an agent to perform some duty, or the whole of the business relating to his agency called is sub agent. It is generally invested with same rights and incurs the same liabilities in regard to his immediate employers, as if he were the sole and real principal. 2. Substitute agent: - According to section 194 and 195, a substitute agent is an agent who is appointed by the principal but his name is suggested by the original agent. He if a full fledge agent who gets the authority directly from the principal and who is directly accountable to the principal. The agent is not liable for those acts which were done by the substitute agent.

Difference between Sub Agent and Substitute Agent: 1. Sub Agent is an agent of Agent, on the other side a substitute agent is appointed by the principal. 2. Sub agent is always accountable to agent for his acts. But in the case of substitute agent, he is directly liable to principal. 8

3. Original agent is liable to principal for his acts and as well as for all the acts of sub agent who was appointed by him. On the other side original agent is not liable to principal for those acts which was done by the substitute agent. 4. There is no privity of contract moves between principal and sub agent, but in the case of substitute agent, principal of privity always exists between principal and substitute agent.


Right of Agent: Right of Retainer: - According to section 217, an agent has the right to retain the money in respect of the following: Any advance payment made by him. Expenses properly incurred by him in conducting agency business for principal. Such remuneration or commission for which he is eligible under agency business.

Right to receive emoluments: - According to section 219 and 220 the agent has the right to receive agreed remuneration or usual emolument as per the customs of the trade in which he has been employed.

Right of Lien: - According to section 221 of Indian law of contract, an agent has the right to use lien against the property of agency whether moveable or immovable, until the 10

amount of remuneration is not received from principal. He can use this right under the following given conditions: Where there is no contract to the contrary Only in respect of those properties the possession of which has been lawfully acquired by the agent. Only in respect of those properties in respect of which some amount is due to the agent. Right to Indemnified against all consequences of lawful acts: - Section 222 of Indian law of contract, give the burden of indemnify all that lawful acts which was done by an agent in the course of agency business. Right to be indemnified against consequences of acts done in good faith: - Section 223 simplifies that an agent has the right to indemnify for all those acts which was done by him in good faith of business. Right to receive compensation for injury caused by the principals neglect: According to section 225, the principal must has to pay compensation to his agent in respect of all those negligence from which agent has injured.

Duties of Agent: 1. Duties to act according to agency business. 2. According to Section 212 Duty to act his part with proper and reasonable care and skill. 3. According to section 213 an agent is bound to render proper accounts to his principal on his demand. 4. An agent is bound to use all reasonable diligence to establish contract with his principal to obtain his instructions. ( Section 214) 11 Sec. 211 the directions of principal or customs of trade of

5. According to section 215 and 216, an agent is bound to disclose all material circumstances which have come to his knowledge on the subject, to the principal and obtain his consent if he desires to deal on his own account in the business of agency. 6. The agent is also bound to pay that all received amount from buyers or customers in the ordinary business of agency to principal. However agent may retain sum amounts in respect of advances made by him or expenses properly incurred by him in conducting the business and also such remuneration as may be payable to him for acting as an agent. ( Section 218) 7. According to section 190 of Indian law of contract an Agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally unless custom of trade of the nature of the agency so requires. 8. Agent is bound to get any secret profit in business dealing with third person.

Personal Liabilities of an Agent: In following given cases the Agent would be personally held liable: 1. Foreign Principal: - If a person has acted as the agent of some principal who resides in some other country, such agent would be held personally liable for all those transaction in his own country. 2. Undisclosed principal: - An agent would be held personally liable if he has not disclosed the name of the principal for whom he is working to the third party. 3. Incompetent principal: - if an agent works for some incompetent principal like minor, unsound mind or any disqualification by any law, agent will be personal liable for all those act which he has done for agency business with third person. 4. Pretended Agent: - A person who pretends to others that he is agent of someone but in reality he was not, then he himself will be personal liable to the third party for all such acts. 12

5. Exceeds Agency: - Where an Agent has exceeded his authority and those acts have not been ratified by the principal later on then he is personally liable for all such transactions.



Right of Principal: -

1. Recover all those damages from agent if he disregards directions of principal. 2. Obtains accounts from Agent. 3. Recover moneys which were actually collected by Agent on behalf of principal. 4. Obtains details of secret profit made by agent and recover it from him. 5. Forfeit remuneration of Agent if he misconducts the business.

Duties of Principal: 14

1. Pay remuneration to agent which was mutually agreed with them. 2. Indemnify Agent for lawful acts done by him as Agent. 3. Indemnify Agent for all acts which were done by him in good faith of business. 4. Indemnify Agent if he suffers loss due to neglect or lack of skills of Principal.


To conclude an agency is a legal relationship whereby one person acts for another. The person that acts for another is the agent, and the person from whom the agent gets authority is the principal. Agency can be created by contract (express or implied, oral or written), by ratification (assent is given either to an act done by someone who had no previous authority to act or to an act that exceeded the authority granted to an agent), by estoppel (a person allows another to act for him/her to such an extent that a third party reasonably believes 15

that an agency relationship exists), or necessity (a person acts for another in an emergency situation without express authority to do so). Unless modified by contract, agents generally owe their duties to their principals. There are many loops in the law of agency for example liablity of the pretended agent there is a personal liability on the agent if the employer does not ratify his acts.Thus a person pretends to act as a agent of another may be saved by the employers ratifying his act.but if no ratification is forthcoming the agent is personally liable to the third party.The agent may suffer a loss relying upon the representation of authority Another example is a person falsely contracting as agent ,not entitled to performance which means that a person with whom a contract has been entered into the character of the agent is not entitled to require the performance of it ,if he was in reality acting ot as a agent ,but on his own.



BOOKS Avatar singh,contract and specific relief.ed 2007

MacIntyre Pgs. 147-161 (Lien), 163 (Termination of Agency), 166 Kelly Pgs. 283-293 (to Commercial Agents), 295-297