CONTRACT OF AGENCY

SUBMITTED BY
Riya Mittal (24)
Simran Kaur (27)
Simranjeet Kaur (28)
 
 AGENCY

Agency is such a contract in which principle employs a person to

represent or act in bringing him into contractual relation with a
third person.
Section – 182 : Agent & Principle
‘AGENT : A person employs to do act on the behalf of another , or
to represent another in the dealings with third person’
 PRINCIPAL : The person for whom such act is
done or who is so represented, is called the ‘principal’ .
FEATURES OF CONTRACT OF AGENCY

1. The principle should be competent to

contract. (Section- 183)
2. The agent may not be competent to contract.
(Section - 184)
3.No consideration is necessary to create
an agency. (Section - 185)
MODES OF CREATION OF AGENCY

1. By expressed or implied authority (Section- 186 &

187)
2. Agent's authority in emergency (Section-188)
(Ishaq v/s madanlal)
3. Principle bound by estoppel
(Section-189)
4. Principle bound by ratification
 RATIFICATION
(Section- 196 to 200)
Right of person as to acts done for him without his
authority
(Section - 196)

Either : To disown the act

or
To ratify the same.
 ESSENTIALS OF VALID RATIFICATION

1. Act done on the behalf of another ( Section - 196)

2. Principle should be in existence and competent to
contract.
3.Ratification may be expressed or implied (Section - 197)
4.Ratification with full knowledge of facts ( Section - 198)
5.Ratification of whole transaction ( Section- 199)
6.Ratification act should not be injurious to a third person
(Section - 200)
 AGENCY IN HUSBAND -
WIFE RELATIONSHIP

1. Agency by co- habitation

2. Agency of necessity.
 KINDS OF AGENTS

1.Auctioneers
2. Factors
3. Brokers
4. Del credere Agents
• Provisions have been made in different sections of the
Indian Contract Act,1872, which confer certain rights as
well as impose certain duties on an agent.

• In the following slides, we shall look into these rights and

duties of an agent.
 DUTIES OF AGENT:
The agent has mainly following duties:
• To do work according to the directions of the principal (section 211)
• To act with reasonable care, skill, and diligence (section 212)
Case- Keppel v. Wheeler
• To render proper accounts (section 213)
Case - Ms. S. Paul and Co. v. State of Tripura,1984
• To communicate with Principal (section 214)
• Not to deal on his own account (section 215)
• Principal entitled to claim benefit from the agent (section
216)
• To pay sums received (section 218)
• Duty on death or unsoundness of the principal( Section
209)
• Duty not to delegate his duties (Section 190)
Rule- Delegatus Non Potest Delegare
Exceptions- where ordinary custom of trade allows, where
to do as such is necessary according to nature of agency.
Case- Moon v. Withey Union (1837)
 SUB-AGENT
• Sub agent defined ; According to section 191, a sub agent
is a person employed by, and acting under the control of,
the original agent in the business of the agency.
• Representation of principal by sub agent properly
appointed (section 192)
Agent’s responsibility for sub agent : The agent is
responsible to the principal for the acts of the sub agent .
Sub- agent’s responsibility : The sub agent is responsible to
the agent, but not to the principal, except in cases of fraud
or wilful wrong.
• Agent’s responsibility for sub agent appointed without
authority (Section 193)
• Relation between principal and person duly appointed by
agent to act in business of agency (Section 194)
• Agents duty in naming such person(Section195)
 RIGHTS OF AGENT:
Sections 217,219-225 of Indian Contract Act,1872 mentions the rights
of agent. The Agent has mainly following rights against the principal:
• Right to retain amount of sums (Section 217)
• Right to receive remuneration (Section 219)
• Right of lien ( Section 221)
• Right to indemnity for lawful acts (Section 222)
• Right of indemnification against the consequences of act done in
good faith (Section 223)
• Case- Adamson v. Jarvis (1827)
• Right of compensation for injury caused by principal’s neglect
(Section 225)
 Relations between principal and agents with third
party

Liabiliy of the principle:

Section 226 of Indian Contract Act 1872 : "Enforcement and consequences
of agent's contracts"
Contracts entered into through an agent, and obligations arising from acts
done by an agent, may be enforced in the same manner, and will have the
same legal consequences as if the contracts had been entered into and the
acts done by the principal in person.
 AUTHORISED AND UNAUTHORISED ACT:
Principal’s liabilty for various kinds of acts has been noted below:

When agent exceeda authority:

Section 227 of Indian Contract Act:
“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”.
section 228 of Indian Contract Act:
“Principal not bound when excess of agent's authority is not separable. —Where an agent does more than he is authroized to do,
and what he does beyond the scope of his authority cannot be separated from what is within it, the principal is not bound to
recognize the transaction”.

Principal liabilty for agents’s fraud, misrepresentation

Principal’s liability for notice to the agent:
Section 229 of Indian Contract Act “Any notice given to or
information obtained by the agent, provided it be given or
obtained in the course of the business transacted by him for
the principal, shall, as between the principal and third
parties, have the same legal consequences as if it had been
given to or obtained by the principal”
and torts:
Section 238: Misrepresentation made, or frauds committed, by agents
acting in the course of their business for their principals, have the
same effect on agreements made by such agents as if such
misrepresentations or frauds had been made orcommitted by the
principals; but misrepresentations made, or frauds committed, by
agents, in matters which do not fall within their authority, do not
affect their principals.
Personal liability of agent:

Section 230 of Indian Contract Act:

Agent cannot personally enforce, nor be bound by, contracts on behalf of
principal: In the absence of any contract to that effect, an agent cannot personally
enforce contracts entered into by him on behalf of his principal, nor is he personally
bound by them.
Presumption of contract to contrary—Such a contract shall be presumed to exist in the
followingcases:—
(1) where the contract is made by an agent for the sale or purchase of goods for a
merchant resident abroad;
(2) where the agent does not disclose the name of his principal;
(3) where the principal, though disclosed, cannot be sued
 When agent acts on behalf
of a foreign principle
Case law: Midland Overseas v.
CMBT Tana (AIR 1999, BOM.
401)
When there is a contract for
the agent’s personal liabilty
Case law: Alliance Mills v. India
Cement Ltd. (AIR 1989, CAL.
59)
when agent acts for an
undisclosed Principle
When an agent makes a
breach of some legal
obligations:
Case law: Nepal Food
Corporation v. U.P. Import &
Export Ltd. (AIR 1988, CAL.
243)
When the principal, though
disclosed, cannot be sued
Case law: union of India v.
Chinaoy Chablani and Co. (AIR
1982, CAL. 365)
Liability of pretended agent:
A person untruly representing himself to be the
authorizedagent of another, and thereby inducing a
thir person to deal with him as such agent, is
liable, if hisalleged employer does not ratify his
acts, to make compensation to the other in respect
of any loss ordamage which he has incurred by so
dealing.
Case law: Krishan kant v. Dilip Kumar (AIR
2014, RAJ. 27)
Option of the third person to sue the agent or principal

Section 233 of Indian Contract Act: Right of person dealing with agent
personally liable: In cases where the agent is personally liable, a person
dealing with him may hold either him or his principal, or both of them
liable.
Illustrations A enters into a contract with B to sell him 100 bales of cotton,
and afterwards discovers that B was acting as agent for C. A may sue either
B or C, or both, for the price of the cotton. A enters into a contract with B
to sell him 100 bales of cotton, and afterwards discovers that B was acting
as agent for C. A may sue either B or C, or both, for the price of the
cotton."
Estoppel against third
person:
Section 234 of Indian Conract Act Consequence of inducing agent or principal to act
on belief that principal or agent will be held exclusively liable: When a person who
has made a contract with an agent induces the agent to act upon the belief that the
principal only will be held liable, or induces the principal to act upon the belief that the
agent only will be held liable, he cannot afterwards hold liable the agent or principal
respectively.
When a person who has made a contract with an agent induces the agent to act upon the
belief that the principal only will be held liable, or induces the principal to act upon the
belief that the agent only will be held liable, he cannot afterwards hold liable the agent or
principal respectively."
TERMINATION OF AGENCY:
SECTION 201 OF INDIAN CONTRACT
ACT: An agency is terminated by the
Principal revoking hisauthority or a by the
agent renouncing the business, or by the
business of theagency being completed or by
either the principal or agent dying or
becoming of unsound mind; or by the
principal being adjudicated an insolvent
under theprovisions of any Act for the time
being in force for the relief of insolvent
debtors.
MODES
By the OF TERMINATION
By the end of Death or insanity OF AGENCY:
completion of Revocation by of principal or
agency time
mutual agents
agreement
By the act of the parties: By the operation of laws:
Principal
Insolvency of Destruction of
becomes a
principalsRevocationsubject
by matter
foreign enemy
the principal

Winding up of a
companybyor firm
Revocation
agent
 Termination of agency, where agent Revocation possible before the
RULES OF REVOCATION OF AUTHORITY
Revocation
implied:
may be express or has an interest in subject-matter:
Accorduing to Section 202. Where the
authority has been exercised:
Section 203 provides the principal can
According to Section 207, revocation of agent has himself an interest in the evoke the authority conferred by him
agency may be either expressed or property which forms the subject-matter on his agent any time before the
implied in the conduct of the principal. of the agency, the agency cannot, in the authority has been exercised so as to
absence of an express contract, be bind the principal.
R.D. Saxena v. Balaram Prasad
terminated to the prejudice of such
Sharma interest. Pankaj Kumar A. Patel V/S Life
Insurance Corporation of India
Smart V/S Sandars, 1848 5 CB 895

Rvocation when authority has been partly
exercised:
According to Section 204, when the authority
has been partly exercised by the agent, there
can be no revocation of agency as regards such
acts and obligations as arise from the acts
already done
Principal to compensate, if there is oremature revocation
without justification SECTION 205:
Where there is an express or implied contract that the agency
should be continued for any period of time, the principal must
make compensation to the agent, or the agent to the principal, as
the case may be, for any previous revocation or renunciation of
the agency without sufficient cause.
 CONTINUEE...

Agent’s duty on termination of agency by

Principal should give reasonable notice of Time from which the termination of agent’s
principal’s death or insanity (Sec 209)
revocation (Sec 206) authority becomes effective (Sec 208):
Agent’s duty on termination of agency by
Notice of revocation or renunciation. — When termination of agent’s authority takes
principal’s death or insanity. — When an agency
Reasonable notice must be given of such effect as to agent, and as to third persons. —The
is terminated by the principal dying or becoming
revocation or renunciation, otherwise the damage termination of the authority of an agent does not,
of unsound mind, the agent is bound to take, on
thereby resulting to the principal or the agent, as so far as regards the agent, take effect before it
behalf of the representatives of his late principal,
the case may be, must be made good to the one becomes known to him, or, so far as regards third
all reasonable steps for the protection and
by the other. persons, before it becomes known to them
preservation of the interests entrusted to him.