You are on page 1of 7


The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual relationships that involve a person, called the agent, that is authorized to act on behalf of another (called the principal) to create a legal relationship with a third party.

This law separates and regulates the relationships between:

Agents and principals; Agents and the third parties with whom they deal on their principals' behalf; and Principals and the third parties when the agents purport to deal on their behalf.

1. General Agents 2. Special Agents 3. Universal Agents 4. Mercantile Agent 5. Factor 6. Commission Agent 7. Del Credere Agent 8. Broker 9. Auctioneer 10. Indenter 11. Banker 12. Advocate

Creation of agency:

Agency by Express Agreement

Express creation of agency is usually in the form of power of attorney on a stamp paper.

Agency by Implied Agreement

It arises when there is no express agreement to appoint an agent. It arises from conduct, situation or relationship of the parties.

Agency by Estoppel
Estoppel means to prevent a person from denying a fact. When a person by his conduct induces others to believe that a certain person is his agent, he is stopped from subsequently denying it.

Agency by Holding Out

The principal is bound by the acts of the agent if, on an earlier occasion he made other persons to believe that other person doing some acts on his behalf is doing with his authority.

Agency by Ratification

When a person acts on behalf of others without his authority, and his act is accepted by that person agency is said to be created by ratification.

Agency by operation of Law

Under partnership Act, every partner is an agent of the firm. Under Companies Act, All directors are agents of the company.

Duties of Agent
Duty to follow directions of the principal or customs of trade Duty to work with Reasonable skill Duty to Render Accounts Duty to communicate Duty to Termination of Agency Duty not to Deal on his Own Account Duty not to make Secret Profit Duty to Pay Sums Received Duty not to delegate Authority

Rights of agent:
Right to Retain Right to receive Remuneration Right of Lien Right to be indemnified for lawful acts Right to be indemnity for acts in good faith Right to Compensation for Injury Right of Stoppage of Goods

Right of Principal
Right to Recover Damages Right to Obtain Secret Profit Right to refuse to indemnity Agent

Duties of Principal
Duty to indemnify for Lawful Acts Duty to indemnify for Acts in Good Faith Duty to indemnify for Injury by Principals Neglect Duty to Pay Remunerations and Dues

Termination of Agency
Agreement Revocation by Principal Revocation by Agent Completion of Business Expiry of time Death of Principal or Agent Insanity of Principal or Agent Insolvency of Principal Destruction of Subject matter On becoming Alien Enemy Change of Law


1. An agent who is appointed to sell good to the highest bidder at a public sale for commission is:
Indenter Auctioneer Del cIedere agent

2. D, a director of a company, contracted S to buy machinery for the company. D acts as an agent of the company so the company is liable for Ds acts as a principal.
Agency by ratification Agency by operation of law

Agency of necessity

3. A mercantile agent is:

Who has the authority to sell or buy goods or to raise money on the security of goods. Who is appointed to do some particular acts in a particular transaction. Who negotiates and makes contracts between principle and the third party.

4. If the principal does not give any directions to agent then the agent should:
Deal on his own account
Follow the custom of trade Terminate the agency

5. B is servant of A. b buys goods on credit from c and pays A for them regularly. B buys the goods from C on credit for personal use. A is liable to C for payment.
Agency by holding out Agency by estoppels Agency by necessity

Law cases of agency:

1. A enter into the contract with b for buying b motor car as an agent of c without c authority. B repudiates the contract before c comes to know of it. C subsequently ratifies and contract sues to enforce it. Discussion: C is entitled to enforce the contract or claim damages. It is a case of agency by ratification. Where the agency come into the existences from the moment the agent acted and not and not from the time where the principal ratified. Hence b repudiation of the contract is inoperative. 2. A enter into the contract with B to sell him 1,000 bales of cotton and afterwards discovers that B was acting as agent of C. advice A as to the person against whom he should bring a suit for the price of the cotton. Discussion: A may sue either B or C or both for the price of the cotton. It is a case of undisclosed principal and the liability of the principal and agent is joint and several in such a case.

3. Where the principal instructed the agent to warehouse the good at a particular

place and the agent warehoused them at a different warehouse which was equally safe, and the goods were destroyed by fire without negligence, it was held that the agent was liable for the loss because any departure from the instructions makes the agent absolutely liable.

Discussion: Duties of agent: they cannot follow the principal advice that why they are liable.