Agency - Indian Contract Act 1956
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Transcript of Agency - Indian Contract Act 1956
INDIAN CONTRACT ACT,1872
CONTRACT OF AGENCY
As per Section 182 of Indian Contract Act,1872 ;
“An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done , or who is represented is called the principal” .
A contract of agency is one by which an agent is authorised to establish privity of contract between agent and third party.
Definitions of Agent & Principal
THE PRINCIPAL – AGENT RELATIONSHIP
PRINCIPAL
THIRD PARTY
AGENT
Principal’s
obligation to
perform
the
contract
Contract with third party on behalf of principal
Agenc
y Co
ntra
ct
Essentials of a Valid Agency
Agreement between principal and agentThe person must act in representative
capacity.The principal must be competent to contract.Agent may not be competent to contract.No consideration required.
General Rules Of Agency
All acts which a person can do himself can be done.
Agency is based on the principal – “ he who does the thing through another does it himself.
TEST OF AGENCY Every person working for another is not an
agent.DISTINGUISHING FEATURES
OF AN AGENT
Representative character(so as to create contractual
relations)
Derivative authority
DIFFERENCE BETWEEN AGENT AND SERVANT
REPRESENTATIVE CHARACTER
CONTROL & SUPERVISION
LIABILITY REMUNERATION
COMPENSATION
WHO MAY EMPLOY AN AGENT?•Any person competent to contract
WHO MAY BE AN AGENT?
• Any person- (even a minor or a person of unsound mind)
CONSIDERATION FOR CREATION OF AGENCY
No consideration is necessaryFact that principal has agreed to be
represented by the agent is a sufficient ‘detriment’ to the principal to support the contract of agency
Usually an agent is paid for his services.
CREATION OF AGENCYAn agency may be created in any of the
following ways:
CREATION OF AGENCY
AGENCY BY RATIFICATION
AGENCY BY EXPRESS
AGREEMENT
AGENCY BY IMPLIED
AGREEMENT
AGENCY BY EXPRESS AGREEMENT (SEC. 187)
Express authorityAgent appointed by words of mouth or by an
agreement in writing.Power of attorney is the usual form of a
written contract of agency.
AGENCY BY IMPLIED AGREEMENT
No express agreementInferred from the circumstances of the case or
from conduct of the parties or from relationship between the parties.
Such an agency may take the following forms: *Agency by Estoppel *Agency by Holding out *Agency by necessity
AGENCY BY ESTOPPEL ( Sec. 237 )
Based on ‘Doctrine Of Estoppel’. When an agent has, without authority, done acts
or incurred obligations to third persons on behalf of his principal . The principal is bound by such acts or obligations, if he has by his words or conduct induced such third person to believe that such acts and obligations were within the scope of agent’s authority.
Agent by Holding Out Based on ‘Doctrine of Holding Out’ which is a
part of the law of estoppel.It’s almost same as agency by estoppelBut unlike ‘agency by estoppel’, it requires some
affirmative or positive act or conduct by the principal to establish agency subsequently.
AGENCY BY NECESSITY In certain circumstances the law confers an authority on one person to
act as agent for another without any regard to the consent of the principal. Such an agency is called agency by necessity.
Where the agent exceeds his authority, bona fide, in an emergency Where the carrier of goods acting as bailee, does anything to protect or
preserve the goods, in an emergency Where a husband improperly leaves his wife without providing proper
means for her sustenance
AGENCY BY RATIFICATIONSection 196 deals with the effect of ratification.
Ratification means the subsequent adoption and acceptance of an act originally done without instructions or authority.
Ratification relates back to the time of contract that is ratification has retrospective effect.
According to Section 197, ratification may be express or implied.
ESSENTIALS OF A VALID RATIFICATION
o The agent must purport to act as agent for a principal who is in contemplation.
o There should be act capable of ratification.
o The principal must be in existence.o The principal must be competent to
contract
The principal must have full knowledge of material facts.
Whole transaction must be ratified.Ratification must be done with in a
reasonable time of the act purported to be ratified.
Ratification must not injure a third person.
EXTENT OF AGENT’S AUTHORITY
The authority of an agent means his capacity to bind the principal to third parties. The scope of agents authority is determined by his:
Actual Authority Express actual authority Implied actual authorityApparent AuthorityAuthority in Emergency
PERSONAL LIABILITY OF AGENT TO THIRD PARTY
According to Section 230 an agent cannot personally enforce contracts entered into by him on behalf of the principal, nor he can be personally liable for them, unless there is a contract to the contrary.
Exceptions to this ruleWhere the agent expressly agreesWhere the agent acts for a foreign principalWhere the agent acts for an unnamed principal
Where the agent acts for an undisclosed principal
Where the agent acts for a principal who cannot be sued
Where the agent exceeds his authorityWhere there is a trade usage or customWhere agent’s authority is coupled with interest