LAW OF AGENCY

LAW OF AGENCY

 Definition of Agent: Under section 182 of the

Contract Act an Agent has been defined as “a
person employed to do any act for another or
represent another in dealings with third person.”
 The person for whom such act is done, or who
is so represented is called principal.
 The relationship between the principal and the
Agent is called Agency.
 Example-Karim appoints Rahim to buy 100
bales of cotton on his behalf. Here Karim is the
principal and Rahim is his Agent.
Functions of Agents:

 The main function of an agent is to

establish relation between the principal
and a third party.
 There is a legal maxim –“He who does
through another does by himself.” i.e. the
act of the agent is the act of the
principal.
Power of Attorney

 When an agent is appointed by the principal by

executing a document in writing and stamped, the
document then is called “power of attorney”.
 Power of attorney is of two types-namely
 General : When an agent is given an authority to
accomplish certain objectives, it is called general
power of attorney, for example-Managing a business.

 Special: a special power of attorney is one by which

an agent is appointed and given authority to do a
specific thing, e.g. selling goods.
 Agent and servant
Parameter Agent Servant

Control S/he exercises power according to S/he works according to the orders of the
directives of the principal but not directly master in every particular matter
controlled

Purpose An agent is appointed to establish A servant is not appointed to do so

contractual relationship of the third party
with the principal

Capability An agent can establish the principal’s A servant can not do it

relationship rigidly with the third party

Remuneration An agent’s remuneration depends on the A servant is given remuneration at certain

nature of his/her work such as rate such as weekly, monthly, yearly etc.
commission on the basis of sale proceeds

Liability An agent remains liable for wrong deeds A master is liable for all wrong doings of
or doings within the limits of his/her power his servant during the period of his/her
employment

Subjugation An agent can work for several principals A full-time servant usually remain
and duty but can not be employed for the work of a employed only for one master and s/he
alteration servant may perform the work of an agent in
special circumstances
 Types of Agents
 (1)Broker-The agent who does not buy and sell in his own
name and does not keep under his possession, the goods or
property of the principal, but only maintains liaison between
buyer and seller in return for a commission, is called a broker.
 2)Factor-A mercantile agent is called a factor. The principal
keep their goods or proprietary documents in his possession for
the purpose of sale. The factor, can sell these goods at his/her
name in his own discretion and without the disclosure of the
name of principal.
 (3)Commission agent-The commission agent can sell the
goods in the market in his name on behalf of the principal at
convenient market price or at a fixed price. On many cases
theses these agent receive possession of the goods from the
principal.
 Types of agent (continues)

 (4)Del Credere Agent-A Del Credere Agent is an

agent who gives guarantee for the performance of the
contract entered into by the other party. Of course he
claims extra remuneration for this job.
 (5)Auctioneer-The agent who sells the principal’s
goods in the open auction at the highest bid is called
“Auctioneer”. Goods are preserved at his custody and
he can work as agent for both the buyer and seller.
 (6)Agent-General and particular-An agent who
represents his principal in all matters relating to a
particular business is called a general agent. On the
other hand an agent who is appointed for a particular
purpose is called a particular agent. His powers are
limited only for that specific job.
 Creation of Agency
 (1)By express contract-Agency may be created by oral or
written contract. A written contract of agency is generally made
by General power of Attorney. Power is provided to the agent to
act on behalf of the principal by this General Power of Attorney
and the agent is bound to comply with the written terms of the
General power of Attorney.
 (2)By implied contract-A contract of agency may be implied
amongst the parties by their conduct, condition, relationship and
surrounding events.
 (3)By holding out or estoppel-A contact of agency may be
created by estoppel. Estoppel means a conclusive admission
which is undeniable by the party whom it affects. If a person
has, by his conduct or statements persuaded others to believe
that a certain person is his agent, he is prevented from
subsequently denying it.
 Creation of Agency (Continues)

 (4)Of necessity-In many circumstances a person is forced to

act as agent for another person. In such circumstances agency
of necessity is created. Example-the captain of a ship ran short
of money being in a distant pest. It was not possible for him to
communicate with the owner of the ship. In this the captain can
pledge the ship for getting money and will be considered as
agent of the owner of the ship by necessity.
Agent’s authority
 The authority of agent may be expressed or implied
 Express authority refers to an oral or written authority
 An authority implied from neighboring circumstances is
called implied authority
 An agent having an authority can do every lawful thing
necessary in conducting the business.
 In case of emergency, an agent has authority to do all
such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence.
 Consequences when the agent goes
beyond the limit of his authority
 (1)When an agent does more than he is authorized to do, and
when the part of what he does, which is within his authority, can
be separated from the part which is beyond his authority so
much only of what he does as is within his authority is binding
as between him and his principal.
 (2)Where an agent does more than what s/he is authorized to
do and what s/he does beyond the scope of his/her authority
cannot be separated from what is within it; the principal is not
bound to recognize the transaction
 (3)The principal will be bound by unauthorized acts of the
agents in the under mentioned cases:
 (i) where the principal is prevented from refusing the authority
of the agent by the rule of estoppel:
 (ii) When the other concerned parties have not received the
notice of determination of the agency even though the agency
has been terminated.
 TERMINATION OF AGENCY

 Contracts of agency may be terminated

 (a) by the act of the different parties of
contract namely the principal and the
Agent; or
 (b) by the operation of law
(A) Termination by the act of the parties

 (1) Agency contract may be terminated at any time by

agreement of both the principal and the agent.

 (2) The agent may terminate the agency by

renouncing hrs authority received by him.

 (3) The principal may terminate the agency by

revocating the authority given by him to the agent.

 If the agent by renouncing the authority received by

him or the principal by revocating the authority given
to the agent by him causes termination of agency
before the stipulated time, the other party shall be
liable to pay compensation to the affected or the
aggrieved party
(B)Termination by operation of law

 (1)The agency will terminate after the expiry of the

stipulated time for which the agency is created
irrespective of not.
 (2)The agency will terminate if the agency has been
created for a specific object and that object has been
performed or this performance is considered to be
impossible.
 (3)The agency will terminate upon the destruction of
its subject-matter.
 (4)The agency will terminate if death or insanity of the
principal or the agent occurs or takes place.
 (5)The agency will terminate if the principal is
insolvent or if s/he is an alien and war is declared
between the country of the alien and that of the agent.
Termination of Agent’s
Authority
 Termination of the agent’s authority takes effect
in respect of the agent from the time it is known
to him/her and in respect of the third parties
when it comes to be known to them.
 Example-Karim gives directive to Rahim for
sale of his/her goods and gives guarantee for
payment of 5 percent commission from sale
proceed of the goods. Subsequently receiving
the letter but which has been sent, sells the
goods for Rahim is entitled to 5% of the sale
price as commission.
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