AGENCY

Agent-Principal Relationship
-Termination-S 201
 By Revocation of the authority;
 Renouncing the business of the agency;
 Business of the agency being completed;
 Principal or agent dying or becoming of
unsound mind;
 Principal being adjudged as insolvent;
 Can also happen by mutual agreement, time
limited duration, dissolution of the principal
firm etc.
 S202

 Where agent has interest in the subject matter of

the agency-
 Such agency cannot be terminated to the
prejudice of such interest.
 Often known as irrevocable agency.
 Situation 1 – A appoints B to sell goods and A
agrees to pay B 10% of the sale proceeds.
 Situation 2 – A owes B Rs 100/- and appoints B as
his agent to sell goods and deduct Rs 100/- from
the sale proceeds before handing over the
amount to A. Commission would be paid extra.
 Furthermore…

 Revoke authority before it has been exercised

 If partly exercised, principal cannot avoid the
liabilities of due exercise of such authority.
 Either party to compensate other if
revocation/ renunciation before expiry of
agreed period in contracts limited by time.
 Reasonable notice to be given.
 Termination of authority should be known to
both agent and third parties, else
consequential liabilities will follow.
 Agent’s Duties
 To take reasonable steps for protection and reservation of
entrusted interests of his/her late principal.
 To conduct business as per the issued directions, or
customs of the trade or discretion.
 Agent to exercise skill and diligence
 Else agent may be sued for damages, account of payments
and agent’s claim for remuneration and indemnity will be
severely contested.
 Can agent sue the principal for accounts?
 Where agent exceeds authority, principal may repudiate
transaction if the excess cannot be severed from the
authorised transaction. If it can be severed, the principal is
bound by the consequences of the authorised part of the
transaction.
 Duties of Agent…contd.
 To communicate with principal when difficulty arises. Connect with
agency of necessity?
 English Law permits repudiating a transaction if agent acts on his own
account. Indian Law permits setting aside if on acting on his own
account, the agent had not disclosed material fact or the transaction
was concluded in a manner disadvantageous to the principal’s interests.
 A appoints B as his agent to find an apartment at a reasonable price. B
knows of such an apartment but avoids procuring that because he
intends to procure it himself. A comes to know of that fact.
If B would have procured another apartment, can A set aside that
transaction?
Is it a situation of conflict of interest?
Can A ask B to hand over the apartment at the price he bought it
himself?
Can B ask for commission on this transaction?
In cases where agent receives secret commission, does the relationship
convert into a debtor – creditor relationship?
 Agent’s Lien

 Agent entitled to retain goods, papers and other

property of the principal, until the amount due to
himself or commission has been paid or
accounted for to him. (S 221).
 Conditions –
 Lawful possession of the goods;
 No agreement to the contrary;
 Property belongs to the principal;
 Received by the agent in the capacity of an agent;
 Agent holds the property on behalf of the principal
and not any third party
 Duties of the Principal

 Principal bound to indemnify against the

consequences of all lawful acts done by agent
 If the agent does any other act in good faith,
the principal is liable to indemnify the same.
 However indemnity will not cover criminal
activities by the agent even if done in good
faith.
 For injuries caused to agent by the lack of
principal’s neglect or lack of skill, principal will
indemnify the agent.
 Remember…

 Notice given to agent is construed as notice

given to principal.
 Agents acting on behalf of undisclosed principal
will be liable personally.
 For pretended agents, if the alleged employed
does not ratify the acts, will be liable for any loss
or damage to the third party.
 Where authority is ostensible, principal may be
bound by his conduct – Principle of Estoppel.