Agency

Agency
Qui facit per alium facit per se
• Concept

• Everyday dealings via agency transactions

• Is an Agent different from Servant, Trustee, Bailee?

Agency
Sec: 182
• Employed by another
• To do an act for the principal
• To represent him in dealing with
third persons

Test
• Representative Capacity
• Derivative Authority
Agency
Competence of Parties
• Who can employ an agent? : Sec 183
• A minor files a suit through his power of attorney and mother against his
two brothers. Whether the power of attorney valid?
• Madanlal Dhariwal v. Bherulal

• When the principal becomes incompetent?

• Mahendra Pratap Singh v Padam Kumar Devi

• Who can be an agent? : Sec 184

• Can a minor bind principal and third party?
• Can a minor bind himself to the principal?
Agency
Features
• Competence of principal
• Consideration not necessary

• What promise acts as a consideration for agency?

• To be bound by the actions of the agent

• To indemnify the agent
Agency
Different Kinds of Agents Del credere Agents

• Auctioneers • Secondary liability

• Legal position: partly of

• Factors insurer and partly of surety

• Brokers • Responsible only for default

by third party
• Del Credere Agents
• Also, pecuniary and not to
perform
• Courturier v Hastie
• C (acting as a del credere) agent agreed to deliver some corn belonging to H to P
which were already on a voyage. The goods were damaged and sold by the
captain. P (the buyer) repudiated the contract. H sued C. Whether C liable?
Agency
Modes of Creation of Agency
Modes Of Creation Of Agency

Express Appointment By conduct/ situation By subsequent

Implied Appointment By necessity
(Sec 186-187) of parties (Estoppel) ratification

Extent of Agent’s Liability of principal Agent’s Authority in

Authority – Sec 188 inducing belief that Emergency – Sec 189
agent’s unauthorized
act were authorized –
Sec 237
Agency
Modes of Creation
Express appointment

• Relationship of principal and agent has its genesis in the contract.

• Syed Abdul Khader v Rami Reddy (1979)

• Delhi Electric Supply Undertaking v Basanti Devi
Agency
Modes of Creation
Implied agency

• An employer allowed to collect premiums from the employees and

forward the collection to the organization. The scheme declared him
as the agent of the employees. Was he also an agent of the
organization?

• X asking Z to transport a car from one place to another? Z meets with

an accident, X liable? What if Z requested and borrowed car from X?
Agency
Modes of Creation Extent of Agent’s Authority : Sec
188
Ishaq v Madanlal
Dingle v Hare

• Nature of the act or business

• Things incidental to the business
• Customs and usages of trade

• The distinction as to extent of agent’s authority becomes immaterial.

Agency
Modes of Creation
Estoppel : Sec 237
Ostensible/Apparent
As it appears to others

• Pickering v Busk

• Watteau v Fenwick

Ostensible Authority > Actual authority

Presumption : Husband and Wife
• Co-habitation
• Living separately?
• With or without fault of husband?

• In domestic establishment
• Living in?? English Matrimonial Proceedings
and Properties Act 1970

Code of Criminal Procedure, 1973

• Only for necessaries

• Debenhen v Mellon (1874)

Agent’s authority through Emergency- Sec 189
• Inability to communicate to the Principal

• Act should be reasonably necessary

Emergency
• Bonafide in the interest of party concerned

• Pre-existing agency necessary ?

Agency
Modes of Creation
Appointment through Ratification
• Sec 196: Act done without authority
• To disown the act : not bound
• To ratify the act : bound as if done under the authority

• Effect of act being disowned ?

• Personal liability of agent – Sec 235

• Sec 197: Express or implied

Agency
Modes of Creation
Essentials of Valid Ratification
1. The act should be done on behalf of Principal
2. Principal –existence and competent
3. Ratification should be with full knowledge of facts
4. Ratification should be of whole transaction
5. Ratified acts should not be injurious to third person
6. To be done within reasonable time
Agency
1. The act should be done on behalf of Principal
Modes of Creation

K instructed R to buy wheat on joint account (for K and for R himself) at x

price. It was not available at that price. So R bought it for slightly higher price,
but on his own account only (did not disclose that he is also buying for K). K
approved the agreement, but as the prices fell and they refused to take the
delivery.
Seller filed a suit for breach against R and K. Can K be held liable?
Agreement made in his own- whether open to be ratified by another?
Case: Keighly v Durant

Undisclosed Principal and Principal not in existence

Agency
Modes of Creation
2. Principal – existence and competent
• When principal is minor
• When a company is not incorporated
• Exception

3. Ratification should be with full knowledge of facts

• Full knowledge of facts
Or
• Unqualified adoption
Agency
Modes of Creation

4. Ratification should be of whole transaction- Sec 199

5. Ratified act must not injure third person –

Sec 200
• Act must be lawful
• Must not injure third person

5. Within reasonable time

Agency
Modes of Creation
Effect of Ratification
• Sec 196- Doctrine of relating back
• Establishes relation between: Principal and Agent and Principal and Third Party

• Contract is deemed to have been made when the agent made the
agreement rather than the date of ratification

• Bolton Partners v Lambert –

• A makes offer to MD of a company who, having no authority to do,
accepts it. A withdraws the offer. After which, the company ratifies it.
Company sues A for specific performance. Is the revocation of offer
effective? What is the date of contract? Is A at loss?
Agency
Modes of Creation

Watson v Davies : Subject to ratification

• D offers to sell property to a trust. Offer accepted by few members of
the board, ‘subject to approval of full members of the board’. The day
on which board was to meet, the defendant withdrew the offer.
• Board ratified it and sued for specific performance.
• Was the revocation effective?
Agency
Modes of Creation
Badri Prasad v State of Madhya Pradesh
• Auction of sale of logs of forest. A made the highest bid. Bid was accepted by
Divisional Officer on 24 December 1956. Payment to be made in 4 installments,
first was paid immediately. For subsequent payments, B became the surety. The
contract was unconditional.
• On 3rd May, Auction sale is ratified and sale deed was signed. However, one week
before the ratification, wooden logs are destroyed due to fire.
• B filed a suit to be declared discharged for the 3 installments remaining, as
subject matter is destroyed before contract was ratified. Therefore no liability to
pay.
• When was the contract deemed to be made? Did the property in goods pass to
A?
Duties of Agent
1. Duty to follow principal’s direction: Section 211
• Lili v Double Day: loss w/o negligence (warehouse case)
• Shankar Lal v State Bank of India : Compulsion of law
2. Duty to show proper skill and care : Section 212
• Keppel v Wheeler : no proper communication
3. Duty to render proper accounts: Sec 213
• Narandas v Papammal: rendition of accounts
4. Duty to communicate with the Principal : Sec 214
5. Duty not to deal on his own account: Sec 215 and Sec 216
• To repudiate the contract in case of dishonest concealment of material fact or
dealings have been disadvantageous
• To claim benefit arisen from the transaction - De Busche v Alt
• Avoid conflict of interest – and not to make secret profit : Bently v. Craven
6. Duty to remit Sums : Sec 218

7. Duty not to delegate his duties : Sec 190 Delegatus non potest delegare

• Custom of trade
• Nature of agency Sub-agent can be employed
• Acts not undertaken to perform personally

• Sub-agent- Sec 191 : Union of India v Mohd Nazim

• Sub-agent when properly appointed -Sec 192
• Sub-agent when appointed without authority- Sec 193
 Sub-agent When appointed properly

Only responsible in cases of fraud or willful wrong

SB Agent
Principal

Third
Party

* Calico Printers Association v Barclays *Summan Singh v N C Bank of New York

Sub-agent when not properly appointed : Sec
193

SB Agent
Principal

Third
Party
 Substituted Agent – Sec 194

Principal

• Agent’s duty in appointing substituted agent – Sec 195

Sub.
Agent
Agent

Third Party
Rights of Agent
• Right to remuneration : Sec 219
• When is remuneration due
• When the act is complete : Saraswati Devi v Moti Lal
• As a result of agent’s services : Green v Bartlett, Tribe v. Taylor (when remotely connected)
• No remuneration for business misconducted : Sec 220
• Agent- No remuneration
• Principal- Compensation
• Right to retain sums: Sec 217
• Right of lien: Sec 221 Loss Of Lien:
• In lawful possession Possession
• In the capacity of agent Waiver
• Particular lien Contract
Rights of Agent
• Right to indemnity : Sec 222 and 223
• Non-liability for criminal acts- Sec 224

• Right to compensation: Sec 225

Effect of Agency : Liability of Principal
• On contracts with third persons: Sec 226
• When agent exceeds authority
• When authorized and unauthorized acts are separable : Sec 227
• When not separable : Sec 228
• Notice to agent : Sec 229
• Agent’s fraud, misrepresentation and torts : Sec 238
• For matters within their authority
• Llyod v Grace Smith and Co
• National Bank of Lahore v Sohan Lal
• M. N Shankar V Maharashtra State Board of Sec. Edu and HS Edu.
• For matters beyond their authority
• State Bank of India v. Shyama Devi
Personal lability of Agent
Pre-requisite
There must be a contract entered into by agent
• General rule: Sec 230 on behalf of the principal

• Presumptions
• Foreign Principal
• Principal unnamed (what if he does not disclose that he is an agent?)
• Rights of undisclosed principal: Sec 231
• Can obtain performance of contract but Subject to Sec 232
• Rights of third party in cases where principal not disclosed: Sec 231
• Principal liable
• Third party can repudiate the contract
• Non-existent or incompetent principal
• Union of India v Chinoy Chablani & Co
Union of India v Chinoy Chablani & Co

• Union of India through the Mineral and Metal Corporation (MMC) of India Ltd. entered
into a contract with Black Sea Steamship Co of USSR.
• The agreement was to carry a consignment of fertilizers from a port in USSR to a port
in India.
• Chinoy Chablani & Co were discharging agents for the consignment.
• When the cargo was discharged, it was found that certain bags of fertilizers were
damaged, torn and were filled with wrong product, due to the negligence of the
Steamship Co.
• Because the Shipping Co belonged to the Government of USSR it could not be sued in
India, the MMC filed a suit for damages against Chinoy Chablani & Co –the agents of
Steamship Co.
• Can Chinoy Chablani be held liable?
Other instances of personal liability of agent
• Liability of a Pretended Agent : Sec 235
• Ratification or disownment
• Breach of legal obligation or commission of torts

Right to sue of third party in cases where agent is personally liable

• Election under Sec 233

• Method of Election and Estoppel under Sec 234
Termination of Agency: Sec 201
• By revocation
• By renunciation
• By completion of business /By expiry of time
• By death or insanity
• By insolvency of Principal
 Rules : Sec 202 to Sec 210
• No revocation when agent has interest in the subject-matter : Sec 202
• Smart v Sanders
• Revocation must be before authority is exercised: Sec 203
• When authority has been partly exercised: Sec 204
• Premature revocation without sufficient cause: Compensation : Sec 205
• Reasonable notice of revocation : Sec 206
• Revocation may be express or implied : Sec 207
• Time when termination becomes effective : Sec 208
• Agents duty on termination of agency by principal’s death or insanity: Sec 209
• Termination of agency terminates sub-agency also: Sec 210
Agency
Qui facit per alium facit per se
• Concept

• Everyday dealings via agency transactions

• Is an Agent different from Servant, Trustee, Bailee?

Agency
Sec: 182
• Employed by another
• To do an act for the principal
• To represent him in dealing with
third persons

Test
• Representative Capacity
• Derivative Authority
Agency
Competence of Parties
• Who can employ an agent? : Sec 183
• A minor files a suit through his power of attorney and mother against his
two brothers. Whether the power of attorney valid?
• Madanlal Dhariwal v. Bherulal

• When the principal becomes incompetent?

• Mahendra Pratap Singh v Padam Kumar Devi

• Who can be an agent? : Sec 184

• Can a minor bind principal and third party?
• Can a minor bind himself to the principal?
Agency
Features
• Competence of principal
• Consideration not necessary

• What promise acts as a consideration for agency?

• To be bound by the actions of the agent

• To indemnify the agent
Agency
Different Kinds of Agents Del credere Agents

• Auctioneers • Secondary liability

• Legal position: partly of

• Factors insurer and partly of surety

• Brokers • Responsible only for default

by third party
• Del Credere Agents
• Also, pecuniary and not to
perform
• Courturier v Hastie
• C (acting as a del credere) agent agreed to deliver some corn belonging to H to P
which were already on a voyage. The goods were damaged and sold by the
captain. P (the buyer) repudiated the contract. H sued C. Whether C liable?
Agency
Modes of Creation of Agency
Modes Of Creation Of Agency

Express Appointment By conduct/ situation By subsequent

Implied Appointment By necessity
(Sec 186-187) of parties (Estoppel) ratification

Extent of Agent’s Liability of principal Agent’s Authority in

Authority – Sec 188 inducing belief that Emergency – Sec 189
agent’s unauthorized
act were authorized –
Sec 237
Agency
Modes of Creation
Express appointment

• Relationship of principal and agent has its genesis in the contract.

• Syed Abdul Khader v Rami Reddy (1979)

• Three persons appointed ‘R’ as a power of attorney but had no joint

property. Whether there was a valid express appointment of an
agent.
Agency
Modes of Creation
Delhi Electric Supply Undertaking v Basanti
Devi
• Salary Saving Scheme started by LIC, under which, employer was
authorized to collect premiums from employees and forward it to LIC.
• Employee X paid the premium, which was not forwarded by the
employer.
• X died and the policy was in the state of lapse
• National Consumer Protection Commission held- employer must pay
the policy amount due to the employee.
• Who is supposed to make payment under policy?
• What do you think SC would have said?
Agency
Modes of Creation
Implied agency

• An employer allowed to collect premiums from the employees and

forward the collection to the organization. The scheme declared him
as the agent of the employees. Was he also an agent of the
organization?

• X asking Z to transport a car from one place to another? Z meets with

an accident, X liable? What if Z requested and borrowed car from X?
Agency
Modes of Creation Extent of Agent’s Authority : Sec
188
• Ishaq v Madanlal
• Ishaq sold potatoes to Madanlal, consigned from Fatehgarh to Khandwa.
Madanlal refused to take delivery.
• Ishaq sent his agent to Khandwa to take delivery and sell the potatoes at the
price he chooses.
• Agent contacts several dealers, including Madanlal.
• Madanlal offers the highest amount for the potatoes, but Rs 700 less than
what he had originally agreed to pay.
• Agent agreed, gave in writing that the payment was in full settlement.
• Did the agent had an authority to accept smaller amount? Was Ishaq bound
by it?
Dingle v Hare
• An agent was authorized to sell artificial manure. It is usual in sale
agreements that the seller gives some kind of warranty. However, the
agent was not given the authority to give any kind of warranty.
• Yet he warranted to the buyer that the manure contained 30 percent
phosphate of lime.
• Warranty turned out to be false and the principal was sued for
breach.
• Can he be held liable?

• If certain acts usual for business, the distinction as to extent of agent’s

authority becomes immaterial.
Agency
Modes of Creation
Estoppel : Sec 237
• When principal places an agent in such a position that it induces third
party to presume that the agent has authority to transact in a business,
the principal is bound by the actions of the agent.

Ostensible/Apparent
As it appears to others

• Pickering v Busk
• X purchased hemp through his agent and allowed it to remain in the
custody of the broker.
• Broker’s ordinary business was to buy and sell hemp.
• He sold the hemp and received a price. Was it binding on X?
Watteau v Fenwick
• F, the owner of a hotel, had forbidden A-the manager from buying
cigars on credit. W gave cigars to the manager on credit, which were
used in business. W only knew A and had never heard of F.
• Later, W is unable to recover money from A and hence sued F.

• Ostensible Authority > Actual authority

• Principal bound by contracts with third parties who do not know the
limitation of agency.
Presumption : Husband and Wife
• Co-habitation
• Living separately?
• With or without fault of husband?

• In domestic establishment
• Living in?? English Matrimonial Proceedings
and Properties Act 1970
• Debenhen v Mellon
Code of Criminal Procedure, 1973

• Only for necessaries

Agent’s authority through Emergency- Sec 189
• Inability to communicate to the Principal

• Act should be reasonably necessary

Emergency
• Pre-existing agency necessary ?

• Bonafide in the interest of party concerned

• Eg: relief to injured person
Agency
Modes of Creation
Appointment through Ratification
• Sec 196: Act done without authority
• To disown the act : not bound
• To ratify the act : bound as if done under the authority

• Effect of act being disowned ?

• Personal liability of agent – Sec 235

• Sec 197: Express or implied

Agency
Modes of Creation
Essentials of Valid Ratification
1. The act should be done on behalf of Principal
2. Principal –existence and competent
3. Ratification should be with full knowledge of facts
4. Ratification should be of whole transaction
5. Ratified acts should not be injurious to third person
6. To be done within reasonable time
Agency
1. The act should be done on behalf of Principal
Modes of Creation

K instructed R to buy wheat on joint account (for K and for R himself) at x

price. It was not available at that price. So R bought it for slightly higher price,
but on his own account only (did not disclose that he is also buying for K). K
approved the agreement, but as the prices fell and they refused to take the
delivery.
Seller filed a suit for breach against R and K. Can K be held liable?
Agreement made in his own- whether open to be ratified by another?
Case: Keighly v Durant

Undisclosed Principal and Principal not in existence

Agency
Modes of Creation
2. Principal – existence and competent
• When principal is minor
• When a company is not incorporated
• Exception

3. Ratification should be with full knowledge of facts

• Full knowledge of facts
Or
• Unqualified adoption
Agency
Modes of Creation

4. Ratification should be of whole transaction- Sec 199

5. Ratified act must not injure third person –

Sec 200
• Act must be lawful
• Must not injure third person

5. Within reasonable time

Agency
Modes of Creation
Effect of Ratification
• Sec 196- Doctrine of relating back
• Establishes relation between: Principal and Agent and Principal and Third Party

• Contract is deemed to have been made when the agent made the
agreement rather than the date of ratification

• Bolton Partners v Lambert –

• A makes offer to MD of a company who, having no authority to do,
accepts it. A withdraws the offer. After which, the company ratifies it.
Company sues A for specific performance. Is the revocation of offer
effective? What is the date of contract? Is A at loss?
Agency
Modes of Creation

Watson v Davies : Subject to ratification

• D offers to sell property to a trust. Offer accepted by few members of
the board, ‘subject to approval of full members of the board’. The day
on which board was to meet, the defendant withdrew the offer.
• Board ratified it and sued for specific performance.
• Was the revocation effective? Yes, because its late.
Agency
Modes of Creation
Badri Prasad v State of Madhya Pradesh
• Auction of sale of logs of forest. A made the highest bid. Bid was accepted by
Divisional Officer on 24 December 1956. Payment to be made in 4 installments,
first was paid immediately. For subsequent payments, B became the surety. The
contract was unconditional.
• On 3rd May, Auction sale is ratified and sale deed was signed. However, one week
before the ratification, wooden logs are destroyed due to fire.
• B filed a suit to be declared discharged for the 3 installments remaining, as
subject matter is destroyed before contract was ratified. Therefore no liability to
pay.
• When was the contract deemed to be made? Did the property in goods pass to
A?
Duties of Agent
1. Duty to follow principal’s direction: Section 211
• Lili v Double Day: loss w/o negligence (warehouse case)
• Shankar Lal v State Bank of India : Compulsion of law
2. Duty to show proper skill and care : Section 212
• Keppel v Wheeler : no proper communication
3. Duty to render proper accounts: Sec 213
• Narandas v Papammal: rendition of accounts
4. Duty to communicate with the Principal : Sec 214
5. Duty not to deal on his own account: Sec 215 and Sec 216
• To repudiate the contract in case of dishonest concealment of material fact or
dealings have been disadvantageous
• To claim benefit arisen from the transaction - De Busche v Alt
• Avoid conflict of interest – and not to make secret profit : Bently v. Craven
6. Duty to remit Sums : Sec 218

7. Duty not to delegate his duties : Sec 190 Delegatus non potest delegare

• Custom of trade
• Nature of agency Sub-agent can be employed
• Acts not undertaken to perform personally

• Sub-agent- Sec 191 : Union of India v Mohd Nazim

• Sub-agent when properly appointed -Sec 192
• Sub-agent when appointed without authority- Sec 193
 Sub-agent When appointed properly

Only responsible in cases of fraud or willful wrong

SB Agent
Principal

Third
Party

Calico printers Association v Barclays

Sub-agent when not properly appointed : Sec
193

SB Agent
Principal

Third
Party
 Substituted Agent – Sec 194

Principal

• Agent’s duty in appointing substituted agent – Sec 195

Sub.
Agent
Agent

Third Party
Rights of Agent
• Right to remuneration : Sec 219
• When is remuneration due
• When the act is complete : Saraswati Devi v Moti Lal
• As a result of agent’s services : Green v Bartlett, Tribe v. Taylor (when remotely connected)
• No remuneration for business misconducted : Sec 220
• Agent- No remuneration
• Principal- Compensation
• Right to retain sums: Sec 217
• Right of lien: Sec 221
• In lawful possession
• Particular lien
• Right to indemnity : Sec 222 and 223
• Non-liability for criminal acts- Sec 224

• Right to compensation: Sec 225

Effect of Agency : Liability of Principal
• On contracts with third persons: Sec 226
• When agent exceeds authority
• When authorized and unauthorized acts are separable : Sec 227
• When not separable : Sec 228
• Notice to agent : Sec 229
• Agent’s fraud, misrepresentation and torts : Sec 238
• For matters within their authority
• Llyod v Grace Smith and Co
• National Bank of Lahore v Sohan Lal
• M. N Shankar V Maharashtra State Board of Sec. Edu and HS Edu.
• For matters beyond their authority
• State Bank of India v. Shyama Devi
Personal liability of Agent
Pre-requisite
There must be a contract entered into by agent
• General rule: Sec 230 on behalf of the principal

• Presumptions
• Foreign Principal
• Principal unnamed (what if he does not disclose that he is an agent?)
• Rights of undisclosed principal: Sec 231
• Can obtain performance of contract but Subject to Sec 232
• Rights of third party in cases where principal not disclosed: Sec 231
• Principal liable to the extent of the agent –Illustration
• Third party can repudiate the contract – Said v Butt
• Non-existent or incompetent principal
• Union of India v Chinoy Chablani & Co
Union of India v Chinoy Chablani & Co

• Union of India through the Mineral and Metal Corporation (MMC) of India Ltd. entered
into a contract with Black Sea Steamship Co of USSR.
• The agreement was to carry a consignment of fertilizers from a port in USSR to a port
in India.
• Chinoy Chablani & Co were discharging agents for the consignment.
• When the cargo was discharged, it was found that certain bags of fertilizers were
damaged, torn and were filled with wrong product, due to the negligence of the
Steamship Co.
• Because the Shipping Co belonged to the Government of USSR it could not be sued in
India, the MMC filed a suit for damages against Chinoy Chablani & Co –the agents of
Steamship Co.
• Can Chinoy Chablani be held liable?
Other instances of personal liability of agent
• Liability of a Pretended Agent : Sec 235
• Ratification or disownment
• Breach of legal obligation or commission of torts

Right to sue of third party in cases where agent is personally liable

• Election under Sec 233

• Method of Election and Estoppel under Sec 234
Termination of Agency: Sec 201
• By revocation
• By renunciation
• By completion of business /By expiry of time
• By death or insanity
• By insolvency of Principal
 Rules : Sec 202 to Sec 210
• No revocation when agent has interest in the subject-matter : Sec 202
• Revocation must be before authority is exercised: Sec 203
• When authority has been partly exercised: Sec 204
• Premature revocation without sufficient cause: Compensation : Sec 205
• Reasonable notice of revocation : Sec 206
• Revocation may be express or implied : Sec 207
• Time when termination becomes effective : Sec 208
• Agents duty on termination of agency by principal’s death or insanity: Sec 209
• Termination of agency terminates sub-agency also: Sec 210
 Partnership
• Partnership Act, 1932

• Need of the Act

• Not exhaustive
Definitions
• Act of firm – any act or omission by or all partners or by any partner
or agent of the firm which gives rise to right enforceable by or against
the firm.

• Business –includes every trade, occupation and profession.

Nature of Partnership
Section 4: DEFINITION OF "PARTNERSHIP", "PARTNER", "FIRM" AND
"FIRM-NAME"
• "Partnership" is the relation between persons who have agreed to
share the profits of a business carried on by all or any of them acting
for all.
• Persons who have entered into partnership with one another are
called individually, "partners" and collectively "a firm", and the name
under which their business is carried on is called the "firm-name
• Abdul Badsha v Century Wood Industries AIR 1954 Mys 33.
• Pratibha Rani v Suraj Kumar AIR 1985 SC 628.