DEFINITION (Sec 182)

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 Principal. The contract which creates the relationship of
principal and agent is called agency. After entering into a contract on behalf
of principal with third party, the agent drops out and ceases to be a party to t
he contract and the contract binds the principal and the third party as if they
have made it themselves.
General Rules for Agency
Whatever a person competent to contract may do by himself, he may do through an
agent, except for acts involving personal skill and qualifications. In fact, whe
re the work to be done is obviously personal, no agent can be employed. For exam
ple, a person cannot marry through an agent, cannot paint a picture through his
agent etc. The rule He who does through another, does by himself, applies in cas
e of agency. In other words the acts of agent are, for all legal purposes, the a
ct of the principal and are enforceable by and against him(Principal). (Sec 226)
----
Test of Agency
Agency exists when a person has an authority to act on behalf of another to crea
te contractual relationship between the other and the third party. Only existenc
e of close relationship, like advising in matters of business, or rendering pers
onal service to his master, or working in his factory, do not constitute agency
because in these cases he is not authorized to deal with third persons.
Who May Employ Agent (Sec 18)
Any person who is of the age of majority, of sound mind and competent. A minor,
lunatic or drunken person cannot employ an agent.
Who May Be An Agent (Sec184)
Any person can be appointed as agent including a minor or a person of unsound mi
nd. The reason being since the act of agent is considered as the act of principa
l hence he may appoint any person as his agent. But in case of appointing a mino
r or a person of unsound as his agent he runs the great risk because he cannot h
old such an agent liable for his misconduct or negligence.
KINDS OF AGENTS (AUTHORITY POINT OF VIEW)
General Agent:
± One who is employed to do all acts connected to the business, e.g. a manager of
a firm. He can bind the principal by doing anything which falls within the ordin
ary scope of business, whether he is actually authorized for any act or not, is
immaterial, provided the third party acts bonafide i.e. they assume that such an
agent has power to do all that which is usual for a general agent to do in a bu
siness concerned.
 Special Agent:
± A special agent is one who is employed to do some particular act or represent hi
s principal in some particular transaction, e.g. an agent employed to sell a mot
or car. ± As soon as the act is performed, the authority of such an agent comes to
an end. ± If a special agent does anything outside his authority, the principal i
s not bound by it, and the third parties are not entitled to assume that the age
nt has unlimited powers. They should therefore, make proper enquiry to the exten
t of authority before entering any contract with him.
 Universal Agent:
± A universal agent is said to be one whose authority is UNLIMITED i.e. who is aut
horized to do all the acts which the principal can lawfully do and can delegate.
± He enjoys extensive powers to transact every kind of business on behalf of his
principal.
KINDS OF AGENTS (NATURE OF WORK POINT OF VIEW)
Mercantile Agent:
± A mercantile agent is one who has authority either to sell goods or to raise mon
ey on the security of goods ± The various kinds of mercantile agents are as under:
Factor:
± He is entrusted for sale of goods. ± He enjoys high discretionary powers in relati
on to sale of goods. ± He sells goods in his own name upon such terms and conditio
ns as he thinks fit. ± He may pledge the goods as well.
Commission Agents:
± He buys and sells goods for his principal on the best possible terms in his own
name. ± He receives commission for his task. ± He may have possession of goods or no
t.
 Del Credere Agent:
± He is the one who in consideration of extra commission, guarantees his principal
that the third person with whom he enters into contract on behalf of the princi
pal shall perform their financial obligations. ± This entails that if the buyer do
es not pay, he(Agent) will pay. ± Thus he occupies the position of surety as well
as of an agent
Broker:
± He is one who is employed to make contracts for the purchase and sale of goods. ±
He is not entrusted with the possession of goods. ± He simply acts as a connecting
link and brings the two parties together to bargain and if the transaction mate
rializes he becomes entitled to his commission called brokerage. ± He makes contra
cts in the name of his principal.
 Non-Mercantile Agents:
± They include
Advocates Attorneys Insurance Agent, Wife.
WAYS TO CREATE AGENCY
1. Agency by Express Agreement:
± Normally agency is created by an express agreement specifying the scope of autho
rity of agent. ± The agent may be appointed by word of mouth or by an agreement in
writing. ± However in certain cases such as to execute a deed for sale or purchas
e of land, the agent must be appointed by executing a formal power of attorney o
n a stamped paper.
 2. Agency by Implied Agreement:
± Not express agreement employing an agent but because of circumstantial situation
s , or from the conduct of parties on a particular occasion, or from the relatio
nship between the parties existence of Agency is inferred. ± Such an agency may ta
ke the following forms:
(a) Agency by estoppel (b) Agency by holding out (c) Agency by necessity
 (a) Agency by Estoppel:
± When an agent has, without authority, has done acts or incurred obligations to t
he third persons on behalf of his principal, the principal is bound by such acts
of obligations, if he has by his words or conduct induced such third persons to
believe that such acts and obligations were within the scope of agent s authori
ty. (Sec 237) ----
(b) Agency by Holding Out:
± In this case also the alleged principal is bound by the acts of the supposed age
nt, if he has induced the third person to believe that they are done with author
ity. ± But unlike in agency of estoppel an agency of holding out requires some aff
irmative or positive act or conduct by the principal to establish agency subsequ
ently. ± However in case of agent of held out nature he has only a limited authori
ty to do acts, the principal is not bound by the act outside the authority. ----
 (c) Agency by Necessity: ± In certain circumstances the law confers an authority o
n one person to act as agent of another without any regard to the concent of the
other . Such an agency is called an agency of necessity. ± Generally the agency o
f necessity arises in the following cases: Where the agent exceeds his authority
, bonafide, in an emergency. --- Where the carrier of goods acting as a bailee, d
oes anything to protect or preserve the goods, in an emergency. --- Where a husba
nd improperly leaves his wife without providing proper means for her sustenance.
----
 3. Agency by Ratification:
± Ratification means the subsequent adaptation and acceptance of an act originally
done without instructions or authority. ± Thus where a principal affirms or adopt
s the unauthorized act of his agent, he is said to have ratified the act and the
re comes into existence an agency by ratification retrospectively.---± Ratificatio
n can either be express (by words) or implied(by action). ----
Essentials of a Valid Ratification
The agent must purport to act as agent for principal who is in contemplation: ± Th
e agent must expressly contract as an agent for a principal in the knowledge of
third parties. ± The principal must be named or must be identifiable and it is not
sufficient to indicate simply that he is acting as agent of someone. ± The word i
dentifiable here means that there must be such a description of principal as sha
ll amount to reasonable designation of him like on behalf of the Vice-Chancellor
, Lucknow University , on behalf of my elder brother . ± Thus, to be valid, ratifi
cation must be done by a person on whose behalf the agent professed to act.
There should be an act capable of ratification: ± The act to be ratified must be l
awful one. ± There can not be ratification of an illegal act or an act which is vo
id.

The principal must be in existence: ± For a valid ratification it is essential tha

t the principal must be in existence at the time when the original contract is m
ade, because rights and obligations cannot attach to non-existent person.

The principal must be competent to contract: ± The principal must have contractual
capacity both at the time of original contract and at the time of ratification.
± Thus a person cannot ratify a contract made on his behalf during his minority.
 The principal must have full knowledge of material facts: ± To constitute a valid
ratification the principal must at the time of ratification must have full knowl
edge of all material facts or give such an unqualified acceptance that the inter
ference may be drawn that he intended to ratify the contract whatever the facts
may be. Whole transaction must be ratified: ± Once a part is accepted, it implies
acceptance of whole. ± There can not be partial rejection and partial ratification
.
 Within reasonable time: ± A ratification to be effective must be made within reaso
nable time after the original contract is made. ± Where the time is expressly fixe
d for the performance of the contract, ratification must be made within that tim
e. Ratification must not injure the third person: ± A ratification cannot be effec
tive where its effect is to subject a third person to damages, or terminate any
right or interest of a third person. ----
AGENT S AUTHORITY
1. Actual Authority: ± An agent can do all such acts as have been assigned to him
either expressly or impliedly and thereby bind the principal to third parties by
acts done within the scope of actual or real authority. 2. Apparent Authority: ±
An agent can also bind the principal to third parties by acts done with in his a
pparent authority, though it is nor in his actual authority, provided the third
party acts bonafide. ± Apparent authority means that an agent having an authority
to do an act or carry on a business has authority to do every lawful thing which
is necessary in order to do such act, or which is usually done in course of con
ducting such business ----
 3. Authority in Emergency:
± An agent has authority in emergency, to do all such acts for the purpose of prot
ecting his principal from loss as would be done by a person of ordinary prudence
in his own case, under similar circumstances. ----
DUTIES OF AGENT
Duty to follow principal s directions and customs:(Sec 211)
To perform the agency work according to the directions given by principal.
± If agent acts otherwise and any loss be sustained, he must make it good to the p
rincipal, and if any profit accrues he must account for it.---± If the principal h
as not given express or implied directions, then it is the duty of the agent to
follow customs prevailing in the same kind of business at a place where the agen
t conducts business. ± If the agent makes the departure he does it at its own risk
and must make good any loss so sustained by the principal. ----
 Duty to carry out work with reasonable skill and diligence: (Sec212) ± The agent m
ust conduct the business of agency with as much skills as generally possessed by
persons engaged in similar business, unless the principal has notice of his wan
t of skill. Further, the agent must act with reasonable diligence and to best of
his skills else he must compensate the principal for loss incurred . --- Duty to
render accounts: (Sec 213) ± To keep proper accounts of his principal s money and
property and render them to him on demand, or periodically if so provided in ag
reement.
 Duty to Communicate: (Sec 214) ± It is the duty of an agent, in cases of difficult
y, to use all reasonable diligence in communicating with his principal, and in s
eeking to obtain his instructions, before taking any steps in facing the difficu
lty or emergency. Duty not to Deal on his Own Account: (Sec 215, 216)
An agent must not deal on his own account in the business of agency, i.e. he mus
t not himself buy from or sell to his principal goods he is asked to sell or buy
on behalf of his principal, without obtaining the concent of his principal afte
r disclosing all material facts to him. ----
 Duty not to make any Profit out of his Agency except his Remuneration: (Sec 217,
218) ± An agent stands in a fiduciary relation to his principal and therefore he
must not make any profit (secret profit) out of his agency. ± He must pay to his p
rincipal all moneys including illegal gratification, if any, received by him on
principal s account. ± He can however deduct all moneys due to himself in respect
of his remuneration or/and expenses properly incurred. ± If his acts are not bonaf
ide, he will lose his remuneration and will have to account for secret profit to
his principal.
 Duty on Termination of Agency by Principal s Death or Insanity: (Sec 209) ± When a
n agency is terminated by the principal s dying or becoming of unsound mind, the
agent must take, on behalf of the representatives of his late principal, all re
asonable steps for the protection and preservation of interests entrusted to him
. Duty not to Delegate Authority: (Sec 190) ± Other than certain exemptions an age
nt must not further delegate his authority to another person, and perform the wo
rk of agency himself.
RIGHTS OF AN AGENT
Right to receive Remuneration (Sec 219, 220) --Right of Retainer (Sec 218) Right
of Lien (Sec 221) Right to be Indemnified against consequences of Lawful Acts (
Sec 222 ) but not for Criminal and Unlawful Acts --- Rights to be Indemnified aga
inst Consequences of Acts done in Good Faith (sec 223) --- Right to Compensation
(Sec 225) ---
PRINCIPAL S LIABILITY FOR ACTS OF AGENT
when the agent acts within the scope of actual and apparent authority (Sec 189)
When agent exceeds his actual as well as apparent authority: ± Where the excess is
separable from authorized portion (Sec 227) ---± Where the excess is NOT separabl
e from authorized portion (Sec 228) ---Liability for agent s misrepresentation o
r fraud (Sec 238) Notice given to agent as notice to principal (Sec 229) Liabili
ty based on doctrine of estoppel (Sec 237) ----
Liability of Unnamed Principal
Unnamed principal means whose existence is disclose but the name is not disclose
d. Once it is disclosed by the agent that he is an agent, the contract made by t
he agent binds the principal, and the agent drops out of the transaction, despit
e the fact that the principal for whom he acted has not been named. However in c
ase agent declines the identity of the principal, he becomes personally liable o
n the contract.
Liability of Undisclosed Principal
Where an agent, having authority to contract on behalf of another, makes the con
tract in his own name (as he himself is principal), concealing not only the name
of his principal but also the fact that there is a principal, his principal is
called undisclosed principal. In such a case neither the existence nor the name
of principal is disclosed and the agent gives an impression to the third party a
s he himself is the contracting party and the agent has authority in fact and is
contracting on behalf of another.
 In case of undisclosed principal, the mutual rights and liabilities of the princ
ipal, the agent and the third party are as follows: ± Since the agent has contract
ed in his own name, he is liable to the third party personally. The agent may be
sued on the contract and he has the right to sue the third party, if the undisc
losed principal remains undisclosed. ± If the third party comes to know the existe
nce of the principal before obtaining judgment against the agent, he may sue eit
her the principal or the agent or the both. ---± If the principal discloses himsel
f before the contract is completed, the third party may refuse to fulfill the co
ntract , if he can show that if he had known who was the principal in the contra
ct or if he had known the agent was not the principal, he would not have entered
the contract.
Liability of Pretended Agent
A person untruly representing himself to be the authorized agent of another, and
thereby inducing the third party to deal with him as such agent, then such agen
t is liable to make compensation to the other party in respect of any loss or da
mage incurred to it in such dealing. (provided his alleged employer does not rat
ify his act). Further such a pretended agent may also be sued for fraud by the a
ggrieved party. Though the pretended agent is liable to make compensation to the
other contracting party, but he has no right to proceed against that party for
performance of the contract.
Personal Liability of Agent to Third Party
Generally the principal is liable for all acts performed by an agent on his beha
lf. However in following cases agent is personally liable for his conduct: Where
the agent expressly agrees Where the agent acts for a foreign principal Where t
he agent acts for an unnamed principal Where the agent acts for an undisclosed p
rincipal Where the agent acts for the principal who cannot be sued. ± Where agent
s authority is coupled with interest. ± ± ± ± ±
TERMINATION OF AGENCY
1. By act of parties 2. By operation of Law
 Self
± Delegation of authority ± Sub-agent ± Substituted agent ± Irrevocable agency