Law of Agency

Mr. Raju Rosha

Law of Agency1. The law of agency is governed by Part X of the Contracts Act

1950 2. An agent is defined as a person employed to do any act for another

or represent another in dealings with third person. 3. The person for whom such act is done, or who is so represented, is

called the “principal”4. Agency is the relationship which subsists between the principal

and the agent, who has been authorized to act for him or represent him in dealings with others

e.g. Azzizul appoints Samdan to sign the agreement on his behalf, here Azzizul is called the principal and Samdan is his agent.

Thus in agency there are two contracts:-

1. between the principal and the agent from which the agent derives his authority to act for and on behalf of the principal.

2. the second, made between the principal and the third party through the work of the agent.

Who can become an principal?

Under Section 183:

1. Any person who is eighteen years old and above

2. who is of sound mind may be a principal. 3. Minor cannot act as a principal.

Who can become an agent ?

Under section 184:

1. Any person may become an agent.

2. Even a minor can be employed as agent.

3. If the agent is to be held liable to the principal , he must be major and of sound mind.

Kinds of Agents

1. Special Agent

2. General Agent

3. Universal Agent

4. Co-Agent

5. Sub-Agent

6. Substituted Agent

1. Special Agent

1. Agent appointed for a particular task only.

2. The agency in such cases lasts for a specific period of for a particular type of job or work.

For example… a property dealer appointed as an agent for a sale of a property is authorize his rights in regards to that property only and that too till its sale or revocation of agency by the principal.

2. General Agent1. As the name suggests, the agent has a general authority in such a

case. 2. A general agent is one who has authority to do all the acts (usually

related to business or Trade) in the interest of his principal. 3. A general agent has a implied authority to bind his principal by

doing various acts necessary for carrying on the business of his principal.

3. Universal Agent1. Universal agent is practically a general agent with very extensive

rights. 2. We can say that an universal agent is a substitute of principal for all

those transactions where in principal cannot participate. 3. We rarely find universal agents in business world today, however

in personal life, a wife, son or a very close friend or relative could become a universal agent.

For example: when a person leaves his country for a long time, he may appoint his son as his universal agent to act on his behalf in his absence.

4. Co-Agent1. This happens when a principal appoints two or more person as

agents jointly. Their authority is joint when nothing is mentioned. 2. It implies that all co-agents concur in the exercise of their authority

unless their authority is fixed or unless circumstances reveal any intention to the contrary.

3. But when their authority is several, any other of the co-agents can act without the concurrence of the other.

5. Sub-Agent1. In the language of law, a sub-agent would be “a person employed

and acting under the control of the original agent in the business of the agency “. 

2. In simple words, sub-agent is an agent of the original agent. 3. As far as third party is concerned, principal can be held liable for

the acts of sub-agent in certain cases like fraud. 4. however in general, agent is responsible to the principal for the

acts of sub-agent.

6. Substituted Agent

1. Substituted agent is almost same as a co-agent or sub-agent.

2. Sections 194 and 195 deals with substituted agents.

3. It states “when an agent holding on express or implied authority to name another person to act for and on behalf of his principal in his business, such agent is know as substituted agent.

Kinds of Mercantile Agents

7. Factor

8. Broker

9. Auctioneer

10. Commission Agent

11. Del Credere Agent

12. Forwarding Agent

13. Clearing Agent

14. Indenting Agent

Mercantile agent: Agent who is authorized by a principal to buy or sell goods, and/or to raise a loan by using the principal's goods as a collateral.

7. Factor

1. A Factor is one type of a mercantile agent who sells goods on behalf of his principal.

2. He has wide authority and discretionary powers to sell goods upon such terms and conditions as he thinks proper.

3. He in broader terms relieves his principal from the burden of his work.

4. If a factor does any act which is beyond his authority, but which is within the scope of his apparent authority, then his principal is bound by such act

8. Broker

1. A broker is a special type of mercantile agent who acts as a middleman between the buyer and the seller.

2. We can say that he is employed to bring about contractual relationship between the principal and the third party.

3. He usually gets commission for the work performed.

4. His function ends when he brings the two parties together.

5. He is never in possession of the subject, therefore cannot exercise the right of lien.

9. Auctioneer

1. Auction is usually a public sale of goods made in the highest of several bidders.

2. An auctioneer is a mercantile agent who is appointed to sell goods on behalf of principal, compensated in terms of commission.

10. Commission Agent

1. A commission agent is generally, appointed for selling or buying goods on behalf of his principal.

2. Such types of agents belongs to a somewhat indefinite class of agents.

3. He/She tries to secure buyer for a seller of a goods and sellers for a buyer of goods and receives a commission in return for his work on the actual sales price.

11. Del Credere Agent

1. A Del Credere agent is a mercantile agent who is employed to sell goods on behalf of his principal.

2. He undertakes to guarantee the payment of dues in consideration for an extra commission.

3. We can say that besides being a mercantile agent a del credere agent finds himself into the shoes of a guarantor as well.

12. Forwarding Agent

1. Forwarding agents render services of collecting goods from their principals and forwarding the same to shipping companies.

2. As foreign trade procedures are more complex that the procedures of home trade, the service of forwarding agents hence helps the producers and exporters to a great extent.

13. Clearing Agent

1. As forwarding agents help the exporters of goods, clearing agents help the importers of goods.

2. They complete various complicated customs and exchange formalities on behalf of the importers who appoint them.

14. Indenting Agent

1. An indenting agent is a commission agent who procures a sale or purchase on behalf of his principal with a merchant abroad for a commission at the rate mentioned in the indent.

2. He is an important mercantile agent who facilitates the distribution of goods at international level.

Methods of Creation of an Agency

1. Agency by Express Agreement

2. Agency by Implication

3. Agency by Ratification

The duties of an agent to Principal

1. Section 211: Duty to act according to principal directions.

2. Section 212: Duty to act with reasonable skill and diligence.

3. Section 213: Duty to render account.

4. Section 214: Duty to communicate.

5. Section 215 & 216: Duty not to deal on his own account.

6. Section 218: Duty to pay over all money.

7. Duty not to use information obtained in the course of the agency against a principal.

8. Duty not to set up adverse title.

9. Section 190: Duty not to delegate.

10. Section 209: Duty to protect and preserve the interest of the principal in case of death or insolvency.

Right of an AGENT

1. Right to remuneration (Sections 219 & 220)

2. Right to retainer (Sections 217)

3. Right to lien (Sections 221)

4. Right to be indemnified against consequences of lawful act (Sections 222)

5. Right to be indemnified against consequences of act done in good faith (Sections 223)

6. Right to compensation (Sections 225)

THANKS