Law Of Agency

By: Ishfaque Rahujo

Meaning & Definition of Agency

Section 182,
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
 Cont..

The person who delegates the authority is

known as principal.
To whom the power is delegated is known as
agent.
The relationship that is created is known as
agency.
 Cont..

A person who act in place of another Agent

The person on whose behalf he acts Principal.
 Features of the contract of
agency
Principal is answerable to third parties for the
acts of agent .
Consideration not necessary Section 185 of
the act clearly lays down , No consideration is
necessary to create an agency
 Cont..

Principal must be competent to employ an agent

Only a person who is competent to contract
can employ an agent. ( Major, Sound Mind )
Agent may not have contractual capacity
A minor or a person of unsound mind may act as
an agent & bind the principal to the third
persons.
 Test Of Agency
A person does not become an agent on behalf
of another merely because he gives him advice
in matters of business.
 Cont..

Every person who acts for another cannot be

agent. Cobbler mending shoes of a man
,servant rendering services for us are not
agents.
Who Can Be An Agent

Any person who is of the age of majority

according to the law to which he is subject and
who is of sound mind, may an agent.
 Cont..

The function of an agent is to bring his principal

into connectional relations with third parties. The
agent is merely a connecting link between the
principal and third parties .
 Difference Between An Agent
And A Servant

Scope of authority: An agent can create a contractual

relationship between the principal and third parties. But a
servant cannot create contractual relationship between its
employer and third parties.
Remuneration:
An agent receives commission for his services.
A servant is generally paid wages or salary.
On whose behalf: An agent may work for several
principals at the same time. A servant can serve only one
master at a time
 Cont..
Control: An agent is not subject to direct control and
supervision of the principal. He is often discretion. But a
servant acts under the direct control and supervision of
his master and must follow all his reasonable order.

Liability of principal: The principal is liable for all the

wrongful acts of his agent which are within the scope of
his authority. But the master is bound by the wrongful
acts of his servant if done in the course of servants
employment.
 Agency Classification

1) Express Agency (sec186) A person may be

appointed agent, either by word of mouth or by writing.
No particular form is required for appointing an agent.
2) Implied Agency (sec187) - An agency which arises
from the conduct, situation or relationships of parties.

.
 Cont..

Agency by Estoppel (sec237) When a person has by

his conduct or statements induced others to believe that a
certain person is his agent, he is estopped from
subsequently denying it.

Ex - A tells B that he is Cs agent, this he does in the

presence of C and within his hearing. C does not object
to the statement of A is actually not his agent. Later B
makes a deal with A as agent of C. C shall be bound by
this deal.
 Cont..

Agency by holding out (sec189) Though part of the

law of estoppels, some affirmative conduct by the
principal is necessary in creation of agency by holding
out.
 Cont..

Ex - A child purchase goods from a shop and desires the

shopkeeper to collect payment from his parents later.
The parents, though not bound to pay, make the
payment. After a few days, the child again makes
purchases from the shop on the credit of the parents.
The parents would be bound this time because, by
making payment earlier without raising any objection,
they had held their child out as their agent for making
such purchases
 Cont..
Agency of necessity (sec189) - This arises where
there is no express or implied appointment of a person
as agent for another but he is forced to act on behalf of a
particular person.

Ex - A horse was sent by rail at the destination it was

not taken delivery by the owner. The station master had
to feed the horse. Held, station master became the agent
by necessity and hence the owner must compensate
him.
 Classification Of Agents

Special Agents who is employed to do some

particular act or represent his principal in some particular
transaction. As soon as the act is performed the
authority of agent comes to an end. E.g. An agent
engaged to sell a house.
General Agent who is employed to do all such acts
which are connected with the business of trade of his
employer. E.g. person appointed as general manager is
a general agent. A general agent can do any lawful act
regarding that business.
 Cont..

Universal Agent a universal agent is the person

whose authority is unlimited. He enjoys powers to
transact every kind of business on behalf of his principal.
A universal agent is authorized by the principal to
perform all acts that can be delegated to him. He has
more powers than those enjoyed by general or special
agent.
Factors is an agent to whom goods are given for the
purpose of selling them. He usually sells the goods in
own name. He can exercise a general right of lien on the
goods delivered to him for balance of payment if any.
 Cont

Auctioneer is an agent who is appointed by the

principal to sell the goods to the highest bidder at a
public auction for a reward in form of commission.
 Cont..

Broker is an agent who negotiates and makes

contracts between principal and third. He do not have
possession of goods nor he can contract in his own
name. He gets commission for his services( brokerage ).
 Cont...
Commission Agent is a mercantile agent who is
employed to buy & sell goods for his principal on best
possible terms. He transact in his own name. He is
entitled to commission. He may or may not have
possession.
Banker act as a mercantile agent on behalf of his
customer when he collects cheques, drafts, bills & pay
insurance premium & buy or sell securities.