CREATION OF AGENCY

Law of Contract

“FACILIUS”(From Latin)

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CONTENT

INTRODUCTION.

DIFFERENT KINDS OF

AGENTS.

SOME FEATURES OF A

CONTRACT OF AGENCY.

MODES OF CREATION OF

AGENCY. Acts done with principal’s actual authority. Agent’s authority in an emergency.

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INTRODUCTION

In an Agency one person (PRINCIPAL) employs another person (AGENT) to represent him or to act on him or to act on his behalf , in dealings with a third person.

SECTION-182, defines the terms “AGENT” and “PRINCIPAL” as follows:

An “agent” is a person employed to do

any act for another or to represent

another in dealings with the third person.

The person for whom such act is done, or

who is so represented, is called the

“principal”.

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DIFFERENT KINDS OF AGENTS

Depending on the kind of authority given to the agent to act on behalf of the principal, the agents are of various kinds.

AUCTIONEERS: An auctioneer is an agent whose business is to sell goods or

other property by auction, i.e., by open sale. The authority vested in him is to sell the goods only.

FACTORS: A factor is a mercantile agent who is entrusted with the

possession of goods for the purpose of sale.

BROKERS: A broker is an agent who has an authority to negotiate the sale or

purchase of goods on behalf of his principal, with the third person.

DEL CREDERE AGENTS: Del credere agent constitutes an exception to the

general rule of agents. He is a mercantile agent, who, on the payment of some extra commission, guarantees the performance of the contract by the third person.

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SOME FEATURES OF A CONTRACT OF AGENCY

THE PRINCIPAL SHOULD BE

COMPETENT TO CONTRACT.

[SECTION-183].

THE AGENT MAY NOT BE

COMPETENT TO CONTRACT.

[SECTION-184].

NO CONSIDERATION IS

NECESSARY TO CREATE AN 3/23/2015

MODES OF CREATION OF AGENCY

An act done by an agent on behalf of the principal binds the principal towards a third person. The relationship of principal and agent between the person represented and the person representing has to exist in order that the principal’s liability towards the third person, arises.

In the following situations , the principal is bound by the acts of the agent ,i.e., in such situations, the agent has the power to bind his principal:

o ACTS DONE WITH PRINCIPAL’S ACTUAL

AUTHORITY.

o AGENT’S AUTHORITY IN

EMERGENCY.[SECTION-189]

o PRINCIPAL BOUND BY ESTOPPEL.

o PRINCIPAL BOUND BY RATIFICATION.

o AGENCY IN HUSBAND-WIFE RELATIONSHIP.3/23/2015

ACTS DONE WITH PRINCIPAL’S ACTUAL AUTHORITY.

A principal is bound by the acts done by his agent with his authority. The authority of an agent may be expressed or implied. [SECTION-187] defines express and implied authority as under:

EXPRESS AUTHORITY-An authority is said to be express when it is given by words spoken or written.

IMPLIED AUTHORITY-An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.

Continued……..

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Extent of implied authority.

Section-188 explains the extent of authority of an agent.

ILLUSTRATION- “A” constitutes “B” his agent to carry on his business of a ship builder. “B” may purchase timber and other materials, and hire workmen for the purpose of carrying on the business.

Some instances-• An agent having authority to receive goods on behalf of the

principal has an implied authority to make the payment due.• An agent having an authority to make bet has an implied authority

to make the payment if the bet is lost.

Note:-The termination of authority of an agent does not have effect as regards third persons until it becomes known to them.

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AGENT’S AUTHORITY IN AN EMERGENCY

Section-189 explains an agent’s authority in an emergency ,as under:

“An agent has authority in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence in his own case, under similar circumstances.”

ILLUSTRATION-

An agent for sale may have goods repair if it be necessary.

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PRINCIPAL BOUND BY ESTOPPEL

Sometimes the principal by his conduct creates an impression in the mind of the third person that the agent has an authority to act on his behalf. In such a case, the principal is liable towards the third person for the acts done by the agent, on the ground of the application of the law of estoppel.

ILLUSTARTION-

“A” consigns goods to “B” for sale, and gives him instructions not to sell under a fixed price. “C” being ignorant of B’s instructions, enters into a contract with “B” to buy the goods at a price lower than the reserved price. “A” is bound by the contract.

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PRINCIPAL BOUND BY RATIFICATION

It has also been noted that when the agent does an act for which he does not have any authority, the principal is not bound for the same. To this there is an exception when the principal may be bound even for the acts done without any authority. If the principal ratifies, i.ie., accords subsequent approval to an act done without his authority, but on his behalf , the principal would be bound in respect of such act.

Ratification covers the section [196-200] of the Indian contract act.

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AGENCY IN HUSBAND- WIFE RELATIONSHIP

Agency by Co-habitation-A married woman cohabiting with her husband is presumed to have the power to pledge the credit of her husband for necessaries. She may receive the supply of goods and services which may be required for the domestic use or which may be of use to her husband, herself or her children. The husband then becomes bound to pay for those necessaries. It is further necessary that the husband and wife must be living in a domestic establishment.

Agency of necessity-Even though the husband and wife were not living together, for instance, when either the husband deserted his wife, or the wife started living separately because of some justifiable reason, the common law recognized the right of the wife to pledge the credit of the husband in respect of the necessaries suitable to the style of living to which she was accustomed.

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