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Task: - This project covers the types of agents, essentials of agency and methods of creation of agency.

An agent is a person employed to do any act for another or to represent another in dealings with third person. The person for whom such act is done, or who is represented, is called the principal. Under a contract of agency the agent is authorized to create a contract between his principal and a third party. An agent is merely a connecting link. After entering in to the contract on behalf of the principal with a third party, the agent drops out and ceases to be a party to the contract and the contract binds the principal and the third party as if they have made it themselves. Agency arises only when one person acts as representative to the other in business dealings in order to create contractual relationship between that other and third party. Example: A appoints B to buy ten bags of sugar on his behalf, A is the principal and B is the agent, the contract between them two is of agency.

Types of agents
Agents are classified in various ways according to the point of view adopted. From the viewpoint of the authority they have, they can be classified as. General agent Special agent Universal agent Mercantile agent Factor Commission agent Del credere agent Broker Indenter Auctioneer Wholesalers Retailers

General agent and special agent

A general agent acts for a principal in the ordinary course of that agents business; a special agent has authority only for a particular purpose that is not part of the ordinary course of business for such an agent. A solicitor would be a general agent if authorized to undertake a range of legal work for a client, but a special agent if only authorized by the client to sell a house. Special Agents: A special agent is also known as a specific or particular agent. Such agent appointed to perform a particular work or to represents his principal in particular transaction only. As soon as the said period lapses, the agency stands terminated. Specific agents have a limited authority and as soon as the entrusted to him is performed, his authority also comes to an end. A special agent cannot bind his principal in any act other than for which he is specially appointed. If he does anything outside his authority, his principal cannot be bound by it. The third parties that deal with a special agent must ascertain the extent of the authority he has. General agents: This type of agents has a general authority to do everything in the course of his agency and he has to perform all the acts in the interest of his principal. Thus, a general agent is one that has authority to do all acts connected with the business of his principal. A Manager of a branch shop of a firm or a commission agent is instances of general agents. General agents have an implied authority to bind his principal by doing various acts necessary for carrying on the business of his principal. Sufficiently wide powers are vested in him to affect the business deals, enter into trade bargains, to make purchases and also payments of the purchases, to receive money on behalf of his principal.

Factor agent:
A factor is an agent who is entrusted with the possession of goods or documents of title to goods and who is allowed to sell them in the factors own name as a principal or in the principals name. The factor has generally been superseded by the mercantile agent. A factor agent can also receive the payments and issue the valid receipts. He is also entitled to pledge the goods in his possession. He has also general lien on the goods.

Mercantile agent:
A mercantile agent is an agent who, in the customary course of business, has authority to sell or to consign goods for sale, or to buy goods, or to raise money on the security of goods. The

general rule is that handing over goods or documents of title to another does not give that person authority to sell, so that anyone buying the goods will not acquire good title he only assist in the sale of goods For e.g. handing over a car to a mechanic for repair does not constitute an authority to sell the car. A disposition by a mercantile agent is an important exception to this general rule.

A broker negotiates contracts between a buyer and a seller without having possession of the goods or the documents of title. Brokers are key players in the commodity markets and exchanges. Some act for both buyers and sellers by virtue of the custom of particular markets. Their job is to make bargain for another and receive commission for doing so. He makes contract in the name of principal. He creates a link between the parties. Broker writes the terms of a contact and delivers to each party a note signed by him.

Commission agent:
A commission agent (or commission merchant) buys or sells goods on behalf of the owner, but does not establish a contractual relationship between the owner and the third party. The commission agent acts as principal in the contract with the third party. Nevertheless, this agent owes to the owner all the duties of an agent to a principal. In a sale the agent is liable to the third party (the buyer) for breach of the implied terms as to quality. In a purchase of goods, the agent is liable to the third party (the seller) for the price, but is not liable to the principal for the quality of the goods. He only receives commission for his services. He may have possession of goods or not.

Del credere agent

A del credere agent indemnifies the principal against loss incurred by the third partys breach of contract in respect of payment, although not in respect of any other breach. Such an agent undertakes to bear the risk of bad debts on credit sales made by him thus he occupies the position of a surety as well as an agent. An exporter, who is uncertain about the financial status of a foreign buyer, might find such a guarantee attractive, which provides that in the event of the buyer failing to pay the guarantor will be liable.

Universal agent
A universal agent is the person whose authority is unlimited he enjoys extensive powers and can transact every kind of business on behalf of his principal. A universal agent is usually appointed by power of attorney and is authorized by the principal to do all acts that can be delegated to him. The principal transfers control of all his affairs to his agent for some period. E.g. When a person leaves his country for a long time, he may appoint his son, wife or friends as his universal agent to act on his behalf in his absence.

An auctioneer is an agent who is authorized to sell goods to the highest bidder at a public sale for commission. He is an agent of the buyer as well as of the owner. An auctioneer has no authority to sell goods by private contracts.

The wholesaler is a connecting link between the manufacture and the retailer. Generally, the wholesalers buy goods and commodities in large quantities with a view to selling them to the retailers who sell the goods to consumer. The wholesaler does not engage themselves in the manufacture of goods. He is only trader engaged in buying and selling activities. Wholesalers deals in the large quantities and do not sell the goods directly to the consumer.

Essentials of Agency
Following are the essentials of an agency 1) Agreement 2) Contractual capacity 3) Consideration ( not necessary) 4) intention

The relationship of the agency is the result of an agreement between the principal and the agent. The agreement may be expressed or implied from the conduct of the parties.

Contractual capacity:
The principal must be competent to contract. It means minor or a person with the unsound mind cannot appoint an agent. If a person acts as an agent of a minor or of a person with unsound mind, the agent shall be personally liable. But the agent needs not to be competent because he incurs no personal liability while making the contract on behalf of the principal. It means a minor or a person with unsound mind can be appointed as an agent.

Consideration may or may not exist in the agency. In order to create an agency consideration is not necessary. The fact that principal has agreed to be represented by the agent is sufficient to determine the principal and to support the contract.

The agent must have intention to act on behalf of the principal. When the agent enters into the contract for himself, then the principal will not be liable. The principal shall only be liable when agent contracts to act on behalf of the agent.

Creation of agency
There is a distinction between the creation of the agency and the authority that an agent has to act on behalf of the principal, although the two issues are necessarily tangled together since the creation of an agency will involve conferment of authority.

An agency may be created: Agency by Express Agreement Agency by implied agreement between the principal and agent
1) Where there is a representation by the principal to the third party that the agent has authority (agency by estoppel)

2) Agency by holding out 3) Where there is an agency of necessity

By operation of law Where the principal ratifies an act by someone who, without authorization, purported to undertake that act as an agent of the principal

Agency by Express Agreement

Generally, agency is created by an express agreement. When an agency is created by words spoken or written it is called express agency. The usual form of a written contract of agency is power of attorney on stamped paper which gives the authority to agent to act on behalf of the principal. Example of express agency is that if A appoints B as his agent to sell his house is an express agency.

Agency by Implied Agreement

It arises when there is no express agreement appointing a person as agent. An implied agency arises from conduct, situation or relationship of parties. Example of implied agency is that A & B are brothers. Live in Karachi and B lives in Rawalpindi. B with the knowledge of A gives his land on lease in Rawalpindi. He collects and remits to A. B is implied agent of A. There can be three types of implied agencies 1. Agency by Estoppel Estoppel means to prevent a person from denying a fact. When a person by his conduct or statement induces others to believe that a certain person is his agent, he is stopped from subsequently denying it. When a agent has without authority, done acts or incurred obligations, to third persons on behalf of his principal, then the principal is bound by such acts or obligations if he has by his words or conduct induced such third person to believe that such acts and obligations were within the scope of the agents authority.

Example is when Ahmed tells Akmal in front of Aqib that he is the agent of Aqib. Aqib does not object to the statement and keeps quite. Later, Akmal enters into a contract with Ahmed thinking that Ahmed is akmals agent. Aqib is bound by this contract. 2. Agency by holding out The principal is bound by the acts of the agent if on a n earlier occasions he made the others believe that the person doing some acts on his behalf is doing them with authority. But if the agent has a limited authority, the principal is not bound for his acts beyond that authority. Example of this is that if zafar gives authority to his servant arsalan, to purchase goods on credit for him from jamal shopkeeper. Zafar had been paying for all the goods bought by arsalan for him. One day zafar gives cash to arsalan for the purchased goods from shopkeeper. Arsalan misappropriates the money and buys the goods on credit. Zafar is liable for shopkeeper for the purchases made by Arsalan.

Agency by necessity Gives an authority to a person to act as an agent for another without any consent of other person. The person can act as an agent under the following conditions. i. ii. iii. iv. v. vi. There must be a real necessasity for acting on behalf of the principal. It must be impossible to get the principals directions. The agent should act bonafide in the interest of the principal. When the agent exceeds his authority bonafide in an emergency. When the carrier of goods does anything to protect the goods in an emergency. When a husband improperly leaves his wife without providing proper means for her substance.

Example is if a businessman asks a driver to take his fruit to Peshawar but the fruit starts perishing in Islamabad and the driver sells the fruit in the sabzi mandi Islamabad. The sale will bind the businessman.

Agency by Ratification
Agency by ratification arises where a person acts on behalf of another, but without his knowledge or authority, if his act is accepted by the latter. If his act is not accepted, there is no agency. Where the acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effect will follow as if they had been performed by his authority. Example can be if Anjum buys 5 bags of cement without the authority of Haider. Haider ratifies anjums act. So Anjum becomes his agent.

Agency by Operation of Law

An agency arises by operation of law. Ander partnership act, every partner is an agent of the firm and the act of the partner to carry on business of the firm binds the firm. Similarly, under Companies Act the directions are the agent of the company. Example is that directors of the company contract with a supplier to buy raw material in blk. The director acts as an agent of the company so the company is liable for directors acts as the company is the principal.