LAW OF AGENCY

LAW OF AGENCY

Definition of AgencyLaw 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 principalAn 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 AgencyThe relationship of an agency is based upon a contract.The contract may be either express or implied.There should be the appointment of an agent by the principal.The person employing the agent must himself have legal capacity or to be competent to do the act for which he employs the agent.

The principal should confer authority on the agent to act for him.Relationship of the agency is based on confidence between the principal and the agent.A contract of agency requires no consideration(sec 185)

Classification of agentsSPECIAL AGENTSGENERAL AGENTSUNIVERSAL 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 AgencyBy 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 agreement1. 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 agentHe ceases to be an agent2. 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.

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.

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 agentTo 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 PrincipalTo pay remuneration to agentTo recover compensation for breach of duty by the agentTo 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 AgencyBy act of parties:By agreement mutual consentBy 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.By renunciation by the agent by giving reasonable notice.

Termination by operation of law:By performance of contract of agency. By death of principal or agent.By expiry of time where agency is for fixed time period.By insolvency of the principal.By destruction of subject matter agency was created to sell a house & house destroys.By becoming alien enemy where principal & agent are from different countries.

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