LAW OF AGENCY

DEFINITION OF AGENCY
Law relating to Agency is contained in chapter 10 of the
Indian Contract Act, 1872 (sections 182 to 238).
Agency is a contractual relation between two parties
created by agreement express or implied.
The relationship of agency arises whenever one person
called Agent has authority to act on behalf of another called
Principal.

Agency is a relationship between two parties.

They are named as agent and principal

An agent is the person who is authorized by his principal to

contract on behalf of him with other parties ( third parties)

Appointment of agents occur when the principal does not

have time or expertise to attend to the matter.

ESSENTIALS OF CONTRACT OF
AGENCY
1.

The relationship of an agency is based upon a contract.

2.

The contract may be either express or implied.

3.

There should be the appointment of an agent by the

principal.

4.

The person employing the agent must himself have legal

capacity or to be competent to do the act for which he
employs the agent.

5.

The principal should confer authority on the agent to

act for him.

6.

Relationship of the agency is based on confidence

between the principal and the agent.

7.

A contract of agency requires no consideration(sec

185)

CLASSIFICATION OF AGENTS

SPECIAL
AGENTS

GENERAL
AGENTS

UNIVERSAL
AGENTS

FROM THE POINT OF VIEW OF NATURE OF WORK TO

BE PERFORMED:

Factors is a mercantile agent to whom the possession of

goods are given for the purpose of selling them. He usually
sells the goods in own name. He can exercise a general right of
lien on the goods delivered to him for balance of payment if
any.

Auctioneer is an agent who is appointed by the principal to

sell the goods on his behalf at a public auction for a reward in
form of commission.

Broker is an agent appointed by the principal for the purpose

of selling or buying goods on his behalf. He do not have
possession of goods nor he can contract in his own name. He
bring seller & buyer together to bargain. He gets commission
brokerage .

Commission Agent is a mercantile agent who is

employed to buy & sell goods for his principal on best
possible terms. He transact in his own name. He is
entitled to commission. He may or may not have
possession.

Del credere Agent is one who guarantees to his principal,

the performance of the financial obligation by party with
whom he enters into a contract on principal behalf, in
consideration of an extra commission. He becomes surety &
become liable on the default of third party.

Banker act as a mercantile agent on behalf of his customer

when he collects cheques, drafts, bills & pay insurance
premium & buy or sell securities.

CREATION OF AGENCY

By express agreement authority is given to agent in

written or by words of mouth. He can bind the principal
to the third parties by his acts to the extent he is
delegated with the authority.

By implied agreement

1. Agency by Estoppel Where a person permit another to

act on his behalf. Principal is estopped from denying his
agents authority.

E.g. A tell B in the presence of P that A is the agent of P. P does not

contradict the statement. B enter into the contract with P on the belief
that A is Ps agent. In such case P would be bound by the contract.

He is not the agent

He ceases to be an agent

2. Agency by holding out Some positive conduct of the principal

indicates that a particular person is his agent.
P sends A to buy goods on credit from C.
A buys goods on credit for himself & refuses to pay. C sue P. P cannot
plead that A had no authority.

3.

Agency by necessity When an agency is created by the

circumstances.

The

impossibility

of

getting

the

instructions from the principal is the basis of creation of

agency by necessity.
E.G.

X sent some horses to Y through a railway company. But

Y did not take the delivery of the horses at the destination

with the result the railway company had to feed the horses.
Held, the railway co. was an agent of necessity & could
recover the amount spent on feeding the horses.

4.

Agency

by

ratification

Ratification

means

subsequent adoption or acceptance by a person of an

unauthorized act done by another on his behalf
without any authority.
X buys 5 bags of wheat on behalf of Y without his
knowledge or authority. Y would be bound by the
contract, if he ratify or accept the same.
It can be expressed or implied

DUTIES OF AN AGENT

To follow principals directions An agent must act within

the scope of the authority conferred on him. An agent was
instructed to insure goods. He failed to do so. The goods
were destroyed. He was held liable to the extent of loss.

To follow the customs in the absence of instructions B, a

broker, in whose business, it is not the custom to sell on
credit, sell goods of A on credit to C, whose credit at the
time was very high. C, before payment, becomes
insolvent. B must make good the loss to A.

To conduct business with reasonable care skill & diligence

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 of his principal in
respect of any loss thereby sustained.

To keep & render accounts to principal when demanded.

To communicate with principal.

Not to deal on his own account If an agent wants to deal

on his own account, he must seek the consent of the
principal first & must acquaint him with all the material
facts. ( Purchase )

Not to make secret profits ( Bribe ) Agency is a judiciary

relation.

To pay sum received he can deduct his remuneration &

all expenses incurred in conducting business.

DUTIES & RIGHTS OF THE

PRINCIPAL

To pay remuneration to agent

To recover compensation for breach of duty by the

agent

To forfeit agents remuneration where he is guilty

of misconduct

To receive any extra profit made by agent.

To enforce the various duties of the agent.

To receive all sums.

TERMINATION OF AGENCY

By act of parties:

1.

By agreement mutual consent

2.

By revocation of authority by the principal The

principal can revoke the authority of an agent at any
time before the authority has been exercised as to bind
the principal.

3.

By renunciation by the agent by giving reasonable

notice.

Termination by operation of law:

1.

By performance of contract of agency.

2.

By death of principal or agent.

3.

By expiry of time where agency is for fixed time period.

4.

By insolvency of the principal.

5.

By destruction of subject matter agency was created to

sell a house & house destroys.

6.

By becoming alien enemy where principal & agent are

from different countries.

GROUP MEMBERS

Natasha sitlani

Puja Bhagwani

Vishal Singh

Nayeem Khan

Sandeep

Ganesh

THANK YOU