MEANING AND NATURE OF AGENCY

The Indian Contract Act ‘an agent is a person employed to do any act for another or to represent another to dealing third person. The person for whom such act is done, or who is so represented is called the principal’. The ‘relationship’ between the agent and the principal is called ‘agency’.

The definition given by the Act is quit wide so as to include even a servant, a casual employee or a shoe-shine boy engaged for polishing the shoes within the destination of an agent. But it is not the intention of law. The term agent is to be used only for a person who represents another and who as the power to effect contractual relationship between the person, i.e., the principal and the third parties.

Thus, the duty of the agent is to enter into contractual relation on behalf of the principal with third parties. He derived his authority to do so from the consent of the principal. But, by doing so, he himself does not became a party to the contract to tenor does he incur any liability under that contract. The principal shall be responsible for the acts of his agent provided they are not outside the scope of his authority. Except for unauthorized acts, an agent does not incur any personal liability in respect of contracts made by him for his principal. An agent, therefore, simply brings his employer, the principal into legal relationship with third parties.

Contracts of agency are based upon two important principles of law;

a) Qui facet per alum facet per se i.e., he who does through another does by himself. The acts of the agent shall, for all legal purposes, be considered to be the acts of the principal.

b) Whatever a person is competent to do by himself, shall also be allowed to do through an agent except in the case of contracts involving personal services such as painting, marriage, etc.

Example: A enters into a contract with B to sell him 100 bales of cotton and afterwards discovers that B was acting as an agent for C. A may sue either B or C, or both, for the price of the cotton.

RIGHTS OF PRINCIPAL:

1. To follow the instructions of his principal: the agent must conduct the business of the principal according to the directions of the later. In the absence of any such directions, he must follow the custom of the business prevailing in the locality where the agent is conducting such business. He will also lose his remuneration.

Example: (i) A as the agent engaged in carry on for B a business in which it is the custom to invest from time to time, at interest the money which may be in hand, omits to make such investment. A must make good to B the interest usually obtained by such investment.

2. Duty to act with skill and diligence: The agent must conduct the business of agency with as much skill as his generally possessed by persons engaged n a similar business unless the principal has noticed of his want of skill. An agent must compensate the principal for any loss directly attributable to the agents neglect, want of skill or his conduct. But he is not responsible for indirect or remote losses caused by such neglect, want of skill or misconduct.

Example: (i) A, a merchant in Calcutta, has an agent B in London to whom a sum of money is paid on A’s account, with orders to remit. B remains the money for a considerable time. A in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest from the day on which it ought to have been paid, according to the usual rate, and further direct loss such as losses by variation rate of exchange but nothing else. (ii) A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper usual enquires as to the solvency of B. B at the time of such sale is insolvent. A must make compensation to his principal in respect of any loss there by sustained.

3. Duty to render account: an agent is bound to render proper accounts to his principal in demand. He must explained those accounts to the principal and produce the vouchers in support f the entries.

4. Duty to communicate with the principal: in cases of difficulty it is duty of the agent to use all reasonable diligence in communicating with the principal and in seeking to obtain his instructions. It is only principal can repudiate the act of the agent in cases there communications with him was possible and the agent did not ask for his instructions.

5. Duty not to delegate his authority: an agent cannot delegate his authority to another person unless authorized or warranted by the usage of trade are nature of the agency. A work entrusted to the agent must be done by him.

6. Duty to protect the interest of principal or his legal representative in the event of the principles unsoundness of mind are his death: when an agency terminated by the principal dying are becoming of unsound mind, the agent is bound to take on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

7. Duty to pay sums received for principal: the agent is bound to pay to his principles all sums received on his account after deducting for his own claim.

Rights and Duties Principal

The agents duties are principal’s rights and agents rights are principals duties.

DUTIES OF PRINCIPAL:

Rights to clime reimbursement for expenses:

Agent has the right to retain out of the money received on behalf of the principal, money advanced or expenses properly incurred in conducting the agency business sec2(17) the agent may have paid the money at request of the principal, or an account of the understanding implied by the terms of the agency or through mercantile usage.

Right to receive remuneration:

Agent as also a right to clime remuneration as may be payable to him for acting as an agent. The amount of remuneration may be retained by him out of the money received an account of the principal in the business agency. But an agent can’t retain sums received by him in one business for his commission in other business through it may be behalf of the same principal.

Rights of indemnification against consequences of all lawful acts:

An agent has right to be indemnified by the principal against the consequences of all lawful acts done in exercise of his authority. The losses and damages must be direct and natural consequences of his act under the contract of agency.

Right of indemnification against consequences of acts done in good faith:

An agent has a right to be indemnified by the principal for any compensation which he may be required to pay to the third parties for injuries caused to them by his wrongful acts with in the scope of his actual authority done his faith.

Right of indemnification for injuries caused by him by principles negligence:

An agent has right to clime compensation for the principles of injuries caused by him by the negligence or want of skill the part of the principal but he can’t claim compensation injuries results from his own negligence are acquiescence after knowledge of the risk agency.