Agent - The Indian Contract Act, 1872
Agent in Section 182 as a person employed to do any act for another or to represent another in dealing with third persons.
Principal - By Section 182, The person for whom such act is done, or who is so represented, is called the “principal”. Therefore, the person who has delegated his authority will be the principal.
Eg: A appoints B to deal with his bank transactions. In this case, A is the Principal, B is the Agent and the Bank is the Third Party.
Section 183 - Who can appoint an Agent? - any person who has attained the age of majority and has a sound mind can appoint an agent
Section 184 - Who may be an Agent?
the person who has attained the age of majority and has a sound mind can become an agent
Creation of Agency
An agency can be created by:
Direct (express) appointment– The standard form of creating an agency is by direct appointment. When a person, in writing or speech appoints another person as his agent, an agency is created between the two.
Implication– When an agent is not directly appointed but his appointment can be inferred from the circumstances, an agency by implication is created.
Necessity– In a situation of necessity, one person can act on behalf of another to save the person from any loss or damage, without expressly being appointed as an agent. This creates an agency out of necessity.
Estoppel– An agency can also be created by estoppel. In a situation where one person behaves in such a manner in front of a third person, as to make someone believe he is an authorized agent on behalf of someone, an agency by estoppel is created.
Ratification– When an act of a person, who acted as another person’s agent (on his behalf) without his knowledge is later ratified by that person, this creates an agency by ratification between the two.
Types of Agents
1. Special Agent- Agent appointed to do a singular specific act.
2. General Agent- Agent appointed to do all acts relating to a specific job.
3. Sub-Agent-An agent appointed by an agent.
4. Co-Agent- Agents together appointed to do an act jointly.
5. Factor- An agent who is remunerated by a commission (one who looks like the apparent owner of the things concerned)
6. Broker- An agent whose job is to create a contractual relationship between two parties.
7. Auctioneer- An agent who acts a seller for the Principal in an auction.
8. Commission Agent- An appointed to buy and sell goods (make the best purchase) for his Principal
9. Del Credere- An agent who acts as a salesperson, broker and guarantor for the Principal. He guarantees the credit extended to the buyer.
Authority of an Agent
Authority of an agent can be both express or implied.
Express authority
According to Section 187, the authority is said to be express when it is given by words spoken or written.
Implied authority
According to Section 187, authority is said to be implied when it is to be inferred from the facts and circumstances of the case. In carrying out the work of the Principal, the agent can take any legal action. That is, the agent can do any lawful thing necessary to carry out the work of the Principal.
Implied authority is of four main types
1. Incidental authority- doing something that is incidental to the due performance of express authority
2. Usual authority- doing that which is usually done by persons occupying the same position
3. Customary authority- doing something according to the pre-established customs of a place where the agent acts
4. Circumstantial authority- doing something according to the circumstances of the case
Sub-Agent
Who is a sub-agent?
Section 191 of the Indian Contract Act, 1872 defines a sub-agent to be a person employed by and acting under the control of the original agent in the business of the agency.
Delegatus non potest delegare
An agent cannot in ordinary circumstances delegate the duty that was delegated to him. The principle is based upon the idea that when a Principal appoints an agent, he does so by placing his confidence and trust in the agent and might not have similar trust in the work of another person.
Difference between sub-agent and substituted agent
When a person, in the capacity of an agent, is asked to name someone for a certain task, the person who is named does not become a sub-agent to the Principal, but a substituted agent.
Agency by Ratification
A principal may subsequently ratify an act done by a person who acted on his behalf without his permission or knowledge. If the act is ratified, a relationship of the agency will come into existence and it will be as if he had previously authorized the person to act his agent. Ratification may be express (by speech or writing) or implied (by act or conduct).
Ratification is not allowed in the following cases
1. When the person’s knowledge of the facts of the case is defective. That is, he only half knows things that he is ratifying to.
2. An act done on behalf of another person which would have the effect of injuring or harming the person or violating any of his rights if the act was done with his authority.
Termination of Agency
An agency can be terminated or is terminated in 5 different ways:
1. When the agent’s authority is revoked by the Principal
2. When the agent renounces the business of the agency
3. When the business of the agency is completed
4. When either of the parties dies or becomes mentally disabled
5. When the Principal is adjudicated an insolvent
Revocation of Agent’s authority
1. It can be revoked any time before the authority has been exercised.
2. If according to the terms of the contract between the two, the agency has to continue upto a certain time, any prior revocation by the Principal shall be compensated for, to the agent.
3. The termination does not take effect before it has been communicated to the agent.
4. Termination of the authority of an agent terminates the authority of all the sub-agents under him.
Agent’s duties to Principal
1. He has to conduct the business of the Principal according to the directions of the Principal.
2. An agent is bound to conduct the business he is supposed to conduct with as much skill as a person on his position ordinarily holds.
3. An agent is supposed to show the relevant accounts to the Principal as and when the Principal demands.
4. An agent has the duty to communicate any difficulty whatsoever he may come across while doing the Principal’s business. He is supposed to perform due diligence in this regard.
5. If any material fact has been concealed or the business is not carried out in the manner that the Principal directed, the Principal can repudiate the contract between them.
6. If the agent carries out the business in the manner he wanted to perform it, rather than on the directions of the Principal, the Principal may claim from the agent any benefit he may have achieved through doing so.
Example : A directs her agent B to buy a certain house for her. B does not buy the house, and tells A that it cannot be bought due to certain reasons, but ends up buying the house herself. In this case, A has the right to claim the house from B at the price which B bought it for herself.
Principal’s duties to Agent
1. The Principal is bound to indemnify the agent against any lawful acts done by him in the exercise of his authority as an agent.
2. The Principal is bound to indemnify the agent against any act done by him in good faith, even if it ended up violating the rights of third parties.
3. The Principal is not liable to the agent if the act that is delegated is criminal in nature. The agent will also in no circumstances be indemnified against criminal acts.
4. The Principal must make compensation to his agent if he causes any injury to him because of his own competence or lack of skill.
Liability of Principal for Agent’s Fraud or Misrepresentation
Section 238, The Principal is liable for any fraud or misrepresentation made by his agent during the course of his business, as if the fraud or misrepresentation was done by the Principal himself.
Rights of an Agent
1. Right of retainer– An agent has the right to retain any remuneration or expenses incurred by him while conducting the Principal’s business.
2. Right to remuneration– An agent, when he has wholly carried out the business of the agency has the right to be remunerated of any expenses suffered by him while conducting the business.
3. Right of Lien on Principal’s property- The agent has the right to hold (keep with himself) any movable or immovable property of the Principal until his due remuneration is paid to him by the Principal.
4. Right to be Indemnified– The agent has the right to be indemnified against all the lawful acts done by him during the course of conducting the Principal’s business.
5. Right to Compensation– The Agent has the right to be compensated for any injury or loss suffered by him due to the lack of skill and competency of the Principal.
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