lecture 13 &14

Contract

of

Agency

Contracts of Agency

Sec 182 of the Indian contract act,1872 defines Agent and Principal as:

• Agent means a person employed to do any act for another or to represent another in dealing with the third persons and

• The principal means a person for whom such act is done or who is so represented.

TEST OF AGENCY• The question as to whether a particular

persons is an agent can be verified by finding out if his acts bind the principal or not

Creation of agency

• Any person who is of the age of majority and is of sound mind may employ an agent.(section183)

• Between the principal and the third persons, any person may become an agent. Even a minor can become an agent.(184)

• No consideration is necessary to create an agency.(185)

Creation of agency

1. Express Agreement

2. Implied Agreement

3. By Ratification

4. By Operation of Law

Types of Implied Agency

• Agency by Estoppel• Agency by Holding out• Agency by Necessity

3. Agency by ratification

Essentials of valid ratification

(i) Act on behalf of the person ratifying the act

(ii) Existence of principal

(iii) Contractual capacity of principal

(iv) Ratification with full knowledge of facts

(v) Ratification within reasonable time

(vi) Act must be lawful

(vii) Ratification must be communicated

(viii) Ratification of whole transaction

(ix) No damage to third party

(x) Ratification relates back to the date of ratification

4. Agency by operation of law

Classification of agents

1. Special agents

2. General agents

3. Universal agents

On the basis of nature of work agents can be

1. Mercantile agent:

(i) Factor : general lien

(ii) Auctioneer : particular lien

(iii)Broker or Commission agent: no lien

(iv)Del creder agents: Both guarantor and agent

(v) Banker

2. Non mercantile agent

Solicitor

Insurance agent

Wife

Duties of an agent:

1. To carry out the work as per the directions of principal

2. To carry out work with reasonable care

3. To render proper accounts to principal

4. To communicate with the principal in case of difficulty

5. Not to deal on his own account

6. To pay sums received for the principal

7. To protect the interests of the principal in case of his death or insolvency of the

8. Not to use information obtained to the course of agency against principal

9. Not to make secret profit from agency

10. Not to set up adverse title

11. Not to put himself in a position where interest and duty conflict

12. Not to delegate authority

Rights of agent:

1. Right of retainer

2. Right to receive remuneration

3. Right of lien

4. Right of indemnification

5. Right of compensation

6. Right of stoppage in transit

Duties of principal

1. To indemnify the agent against the consequences of all unlawful acts

2. To indemnify the agent against the consequences of acts done in good faith

3. To indemnify agent for injury caused by principal’s neglect

4. To pay the agent the commission or other remuneration agreed

Rights of principal

1. To recover damages

2. To obtain an account of secret profits and recover them and resist a claim for remuneration

3. To resist agent’s claim for indemnity against liability incurred

Personal Liability of agent

1. When contract expressly provides

2. Agent acts for foreign principal

3. Agent acts for undisclosed principal

4. When principal can not be sued

5. Where agent signs contract in his name

6. Principal is not in existence

7. Liable for breach of warranty of authority

8. When he pays or receives money by mistake

9. Authority is coupled with interest

10. Trade makes agent personally liable

Termination of Agency

A. By the act of parties

1. Agreement

2. Revocation of authority by the principal

3. Revocation by the agent

B. By Operation of Law:

1. Performance of contract

2. Death and insanity

3. Expiry of time

4. Insolvency

5. Destruction of subject matter

6. Principal becoming alien enemy

7. Dissolution of company

Irrevocable agency

1. Agency coupled with interest

2. Where the agent has incurred a personal liability

3. Where the agent has partly exercised the authority

THANK YOU

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