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AGENT’S AUTHORITY
LAW OF CONTRACTS-II
The final project submitted on complete fulfillment of the course, law of contracts-II during the
academic session 2019-2020, Semester-3.

Submitted by- Submitted to-

Name- Madhavi Bohra Dr. Vijay Kumar Vimal

Roll no.-2023 Faculty of law of contracts II

BBA. LLB. (3rd semester)

August, 2019
CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR,
Mithapur, patna 800001.
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ACKNOWLEDGEMENT

I would like to thank my faculty Dr. vijay kumar vimal whose assignment of such a relevant
topic made me work towards knowing the subject with a greater interest and enthusiasm and
moreover he guided me throughout the project.
I owe the present accomplishment of my project to my friends, who helped me immensely with
sources of research materials throughout the project and without whom I couldn’t have
completed it in the present way.
I would also like to extend my gratitude to my parents and all those unseen hands who helped
me out at every stage of my project.

Thank you
Name- Madhavi Bohra
Roll no.- 2023
Semester- 3rd.
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DECLARATION

I hereby declare that the work reported in this project report entitled “agent’s
authority” submitted at Chanakya National Law University, Patna is an outcome
of my work carried out under the supervision of Dr. Vijay kumar vimal. I have
duly acknowledged all the sources from which the ideas and extracts have been
taken. To the best of my understanding, the project is free from any plagiarism
issue.
Madhavi bohra
Date- 21-08-2019.
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Contents
1. Introduction- ...................................................................................................................... 5
1.1 Meaning and definition of agency- ............................................................................. 6
1.2 Features of the contract of the agency- ....................................................................... 6
1.2.1 one is -principle.................................................................................................... 6
1.2.2 Test of agency- ..................................................................................................... 7
1.2.3 Creation of agency- .............................................................................................. 7
1.2.4 Agency by stopple- .............................................................................................. 7
1.2.5 Agency by necessity ............................................................................................ 7
2. Duties and rights of an agent- ............................................................................................ 8
3. Agent’s authority- .............................................................................................................. 9
4. Types of Authority of Agents- ......................................................................................... 10
4.1 Actual authority- ....................................................................................................... 10
4.2 Apparent Authority is Real Authority. ...................................................................... 12
4.2.1 Representation.................................................................................................... 12
4.2.2 Statutory Provision about Apparent Authority. ................................................. 12
4.3 Usual Or Incidental Authority ................................................................................... 13
4.4 Employer’s Authortiy To Pay Insurance Premium ................................................... 13
4.5 Agent’s Authority In An Emergency ........................................................................ 14
4.6 Authority Of Special Agents ..................................................................................... 14
5 mercantile agent and its type- .......................................................................................... 16
5.1 kinds of mercantile agent- ......................................................................................... 16
5.1.1 on the basis of rights- ......................................................................................... 16
5.1.2 On the basis of function- .................................................................................... 16
6 Agent Exceeding Authority ............................................................................................. 18
7 Conclusion- ...................................................................................................................... 19
8 bibliography- .................................................................................................................... 20
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1. INTRODUCTION-
An agent is one who is:

 Employed by another (the principal);


 To do any act for that principal; or
 To represent him in dealing with third persons.

An agent is a person employed to do any act for another or to represent another in dealings
with third persons.1The person for whom such act is done, or who is so represented, is called
the ‘principal’. The Indian Contract Act of 1872 does not make any distinction between
different classes of agents.2 On one hand an agent may be appointed by the principal, it also
includes an employment by any authority authorised by law to make the employment.3 Agents
are distinguished in respect of authority as general or special agents. The former expression
includes brokers, factors, partners, and all persons employed in a business of filling a position
of a generally recognised character, the extent of authority being apparent from the nature of
employment or position; the latter denotes an agent appointed for a particular occasion or
purpose, limited by the employment.4 A special agent has only authority to do some particular
act for some special occasion or purpose which is not within the ordinary course of his business
or profession.5 This distinction is made to determine the authority of that agent. It has been
stated:6

“A general agent has the full apparent authority due to his employment or position and the
principal will be bound by his acts within that authority though he may have imposed special
restrictive limits which are not known to the other contracting party. A special agent has no
apparent authority beyond the limits of his appointment and the principal is not bound by his
acts in excess of those limits whether the other contracting party knows of them or not.”

Agency is a fiduciary relationship in which one entity principle authorizes another i.e. agent to
act on its behalf in dealing with third parties. Fiduciary is a relationship in which agent takes
in and handles money and signs contracts on behalf of the principle and is accountable. Now
when we talk about insurance, here the agency becomes important, here the agency is the

1
Section 182 of the Indian Contract Act, 1872.
2
Kalyanji Kuwarji v. Tirkaram Sheolal AIR 1938 Nag 254.
3
Sukumari Gupta v. Dhirendra Nath Roy Chowdhury AIR 1941 Cal 643.
4
Leake, Page 323, 6th Edition.
5
Amrit Lal C Shah v. Ram Kumar AIR 1962 Punj 325.
6
Jacob v. Morris [1902] 1 Ch 816.
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fiduciary, lawful situation, a relationship between the agent and the principle. The agent signs
the contract on behalf of the principle and is liable to pay money and other liabilities.

The law of agency: The law of agency is an area of commercial law, dealing with a set of
contractual, cause-contractual and non-contractual fiduciary relationships that involve a person
called the agent who is authorized to act on behalf of another i.e. principle to create legal
relationships with the third party i.e. the laws of agency relate to the law of contract. i.e the
agency and the principle and the relationship is crystallized by the agent who has got the ability
to sign and to initiate the contract.

1.1 MEANING AND DEFINITION OF AGENCY-


Meaning and definition of agencies .Section 182, Says an agent is a perso who is employed to
do any act for another, to represent another in dealing with third persons. The person for whom
such act is done or who is so represented is called the principle. So the section 182 says that
the relationship between the agent and the principle is contractual .The agent has got the right
to sign for principle. Let’s study the various factors. First is principle. The person who delegates
the authority is known as the principle. Agent- To whom the power is delegated is known as
the agent. Agency -the relationship created between principle and agent is called as an agency.
So the various components of this act relate to the principle the agent and the agency. The basic
relation is between the agency and the principle is through the agent.

1.2 FEATURES OF THE CONTRACT OF THE AGENCY-


1.2.1 one is -principle. He is answerable to the third parties for the acts of
the agents. He must be competent to employee an agent. Only a person
who is competent to contract can employee an agent. I.e. he must be a
major with a sound mind. Principle is a person who is generally
eligible to sign the law of contract. The law of contract makes people
eligible if you have a sound mind and you are mature i.e. you are above
18 yrs. of age. The contractual agency section 185 of the act clearly
lies down that no consideration is necessary to create an agency.
agency is a fiduciary relationship. So anything can be agency. No
guidelines are laid for the creation of agency.
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1.2.2 Test of agency- a person does not becomes an agent on behalf of


another, merely because he gives him advice in matters of business.
Every person who acts for another cannot be agent. Cobbler mending
shoes for a men or a servant rendering services for us, they are not
agents. So any person who is doing activities on behalf of you is not
agent. Agent is somebody who is guided by the law of contract.
1.2.3 Creation of agency- by express agreement authority is given to agent
in written or by words of mouth. He can bind the principle to the third
parties by his acts to the extent that he is delegated with the authority
by implied agreement. Creation of agency- agency by holding out,
some positive conduct of the principle indicates that a particular
person is his agent. B sends A to buy goods on credit from C. A buy
goods on credit for himself and refuses to pay. see now sues B.B
cannot plead that A had no authority , so generally if you have positive
attitude for someone and you are acting your activities through another
person then it is aright conveyed to him and now you can generally be
an agent for that person
1.2.4 Agency by stopple- Where a person permits another to act on his
behalf. Principle is stopped from denying his agents authority. So the
creation of agency is by agreement. I.e. the agent is there and he must
be compelled or he must be compelled through law. That he must have
the authority to act on behalf of agency or on the bases of the act.
1.2.5 Agency by necessity- when an agency is created by the
circumstances, this is known as agency by necessity. The impossibility
of getting the instruction from the principle is the bases of the creation
of the agency by necessity. Now we will understand this by an
example. Let’s see the example is. X sends sum horses to Y through
Railway Company. But Y did not take the delivery of the horses at the
destination with the result that the railway company had to feed the
horses. Held the railway company was an agent of necessity and could
recover the amount spent on feeding the horses. So sometimes the
condition forces you to act as an agency in special circumstances as
depicted over here.
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2. DUTIES AND RIGHTS OF AN AGENT-


Under the Indian Law, the Agent has certain duties. An agent is bound to conduct the business
of his principal according to the directions given by the principal, or, in absence of any such
directions, according to the custom which prevails.7 It is the duty of every agent to carry out
the mandate of his principal.8 An agent is bound to conduct the business of the agency with as
much skill as is reasonable.9 An agent is bound to render proper accounts to his principal on
demand.10 It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in
communicating with his principal, and in seeking to obtain his instructions.11 If an agent deals
on his own account in the business of the agency, the principal may repudiate the transaction.
The important rights of an agent can be seen as well. In the absence of any special contract,
payment for the performance of any act is not due to the agent until the completion of such act.
An agent who is guilty of misconduct in the business of the agency is not entitled to any
remuneration in respect of that part of the business that he has misconducted. An agent may
retain all moneys due to himself in respect of advances made or expenses properly incurred by
him in conducting such business. The employer of an agent is bound to indemnify him against
the consequences of all lawful acts done within the authority. Where one person employs
another to do an act, and the agent does the act in good faith, the employer is liable to indemnify
the agent against the consequences of that act. Where one person employs another to do an act
which is criminal, the employer is not liable to the agent. The principal must make
compensation to his agent in respect of injury caused to such agent by the principal’s neglect
or want of skill.

7
Section 211 of the Indian Contract Act, 1872.
8
Singh, Avtar Law of Contract and Specific Relief Page 745 (Tenth Edition).
9
Section 212 of the Indian Contract Act, 1872.
10
Section 213 of the Indian Contract Act, 1872.
.
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3. AGENT’S AUTHORITY-

It has been seen in the case of Palestar Electronics Private Limited v. Additional
Commissioner12 that the acts of the agent within the scope of his authority bind the principal.
Contracts entered into through an agent, and obligations arising from acts done by the agent,
may be enforced in the same manner, and will have the same legal consequences, as if the
contracts had been entered into and the acts done by the principal in person.13 It is necessary
for this effect to follow that the agent must have done the act within the scope of his authority.
The authority of an agent and more particularly its scope are subjects to some controversy. 14
The uncertainty is largely due to the fact that the authority of an agent does not depend upon
one source. It has been rightly held in the case of Ramlesh v. Jasbir Singh15 that agency came
into being to promote and not to hinder commerce. The authority of an agent means his capacity
to bind the principal. It refers to “the sum total of the acts it has been agreed between principal
and agent that the agent should do on behalf of the principal.”16 When the agent does any such
acts, it is said he has acted within his authority as was seen in the case of Nand Lal Thanvi v.
LR of Goswami Brij Bhushan.17 With regards to contracts and acts which are not actually
authorised, the principal may be bound by them, on the principle of estoppels, if they are within
the scope of the agent’s ostensible authority, but in no case is he bound by any unauthorised
act or transaction with respect to persons having notice that the actual authority is being
exceeded.18

12
(1978) 1 SCC 636.
13
Section 226 of the Indian Contract Act, 1872.
14
Municipal Corporation, Delhi v. Jagdish Lal (1969) 3 SCC 389. Sardar Gurucharan Singh v. Mahendra Singh
(2004) 1 MPLJ 252 (MP).
15
AIR 2004 P&H 216.
16
Montrose, J.L. Actual and Apparent Authority, (1938).
17
AIR 1973 All 302.
18
Mulla, Dinshah Fardunji Mulla The Indian Contract Act Page 344 (13th Edition 2011).
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4. TYPES OF AUTHORITY OF AGENTS-

4.1 ACTUAL AUTHORITY-


The authority conferred on an agent by the principal is termed as the actual authority. It can be
classified into two categories, namely express and implied.19 An authority is said to be express
when it is given by words spoken or written20. A power of attorney can be taken as an example
of express authority as was seen in the case of Syed Abdul Khader v. Rami Reddy.21 The scope
of express authority is worked out by the construction of words used in the documents. 22 A
case on this point can be that of Attwood v. Munnings23 where a principal, while going abroad,
authorised his agent and partner to carry on his business, and his wife to accept bills on his
behalf for his personal business, he was not held bound when his wife accepted bills on his
behalf for the business, which the agent was conducting and which was different from his
personal business. In the case of Reid v. Rigby24 where the agent obtained a loan outside his
authority by signing a cheque on behalf of his principal to pay the principal’s workmen, the
principal was held bound. But where the third party has knowledge of the limitation of the
agent’s authority or could have discovered it by reasonable examination, he would be bound
by it as held in the case of Ferguson v. Um Chand Boid. 25 An agent cannot borrow on behalf
of his principal unless he has clear authority to do so. Where the agent has the power to borrow,
the fact that he borrowed beyond the authorised limit, does not prevent the third party from
holding the principal liable as was held in the case of Withington v. Herring.26 The fact that the
agent has acted from improper motive does not take the case beyond the scope of authority as
seen in the case of Hambro v. Burnard.27 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.28 The distinction between express and
implied authority depends merely on whether the authority is delimited by words or by conduct.

19
Section 186 of the Indian Contract Act, 1872.
20
Section 187 of the Indian Contract Act, 1872.
21
AIR 1979 SC 553.
22
Singh, Avtar Law of Contract and Specific Relief Page 775 (Tenth Edition).
23
(1827) 7 B&C 278.
24
(1894) 2 QB 40.
25
(1905) 33 Cal 343.
26
(1829) 5 Bing 442.
27
(1904) 2 KB 10 (CA).
28
See Section 187 of the Indian Contract Act, 1872.
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In the case of Ramanathan v. Kumarappa29 an estate agent was appointed to find a purchaser
for a certain property. He accepted a deposit from a prospective customer and misappropriated
it. The principal was held liable because an estate agent has an implied authority to take a
deposit. However, he cannot receive payment or give any warranty unless actually authorised
as held in the case of Foujdar Kameshwar Dutt Singh v. Ghanshyamdas.30

“Ostensible or apparent authority is the authority of an agent as it appears to others. It often


coincides with actual authority. Thus, when the board (of directors) appoint one of their
members to be a managing director they invest him not only with implied authority, but also
with ostensible authority to do all such things as fall within the usual scope of that office.”31
Willis J held that once it is established that the defendant was the real principal, the ordinary
doctrine as to principal and agent applied, that the principal is liable for all the acts of the agent
which are within the authority usually confined to an agent of that character, notwithstanding
limitations, as between the principal and the agent, put upon that authority. In the case of
Valapad Co-operative Stores Limited v. Srinivasa Iyer,32 it was held: “The term ‘ostensible
authority’ denotes no authority at all. It is a phrase conveniently used to describe the position
which arises when one person has clothed another, or allowed him to assume an appearance of
authority to act on his behalf, without actually giving him any authority either express or
implied, by which appearance of authority a third party is misled into believing that a real
authority exists.”

29
AIR 1938 Cal 423.
30
1987 Supp SCC 689.
31
Denning LJ.
32
AIR 1964 Ker 176.
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4.2 APPARENT AUTHORITY IS REAL AUTHORITY.


This statement portrays the truth in Lord Ellenborough’s observation in the case of Pickering
v. Busk.33 It depends upon the facts of the case.

4.2.1 Representation.
The doctrine of apparent authority is really an application of the principle of estoppel, for
estoppel means only that a person is not permitted to resist an inference which can reasonably
be drawn from the principal’s words or conduct. A case on this point is that of Egyptian
International Foreign Trade Company v. Soplex Wholesale Supplies Limited (The Raffaella)34
The person making the representation is estopped from denying the ostensible authority which
was thus created.35 Three things should be noted here. The representation must be made by or
with the authority of the principal. Ostensible authority cannot be created by simply a
representation of the agent.36 The third party must rely on a representation of the agent’s
authority to act as agent.37 The agent’s want of authority must be unknown to the third party.

4.2.2 Statutory Provision about Apparent Authority.


When an agent has, without authority, done acts or incurred obligations to third persons on
behalf of his principal, the principal is bound by such acts or obligations if he has by his words
or conduct induced such persons to believe that such acts and obligations were within the scope
of the agent’s authority.38 A case on this point is that of Bissessardas Kasturchand v.
Kabulchand39 where the court said: “Their Lordships of the Judicial Committee of the Privy
Council ruled that the right of a third party against the principal on the contract of his agent
though made in excess of agent’s actual authority was nevertheless to be enforced when the
evidence showed that the contracting party had been led into an honest belief in the existence
of the authority to the extent apparent to him.’40 Where, however, a person contracting with the
agent has actual or constructive notice of any restriction on the agent’s ostensible authority, he
is bound by the authority.41The ultimate question is whether the circumstances under which a

33
1812 KB 15.
34
[1985] 2 Lloyd’s Report 36.
35
Anson Law of Contract Page 671 (28th Edition).
36
Attorney General for Ceylon v. Silva [1953] A.C. 461.
37
Farquharson Brothers v. King and Company [1902] A.C. 325.
38
Section 237 of the Indian Contract Act, 1872.
39
AIR 1945 Nag 121.
40
Ram Pertab v. Marshall ILR (1898) 26 Cal 701.
41
Sarshar Ali v. Roberts Cotton Association (1963) 1 SC 244 (Pak).
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servant has made a fraudulent misrepresentation which has caused loss to an innocent party
conducting with him are such as to make it just for the employer to bear the loss.

4.3 USUAL OR INCIDENTAL AUTHORITY


In certain circumstances, a principal may be liable for the unauthorized acts of an agent. In
these cases, the existence of the principal was unknown to the third party, so that it could not
be said that the principal held out the agent to have authority to act as agent and was estopped.
In the case of Watteau v. Fenwick42 it was said that an undisclosed principal who employs an
agent to conduct business is liable for any act of the agent which is incidental to or usual in that
business. Willis J. said- “The principal is liable for all the acts of the agent which are within
the authority usually confided to an agent of that character, notwithstanding limitations as
between the principal and the agent, put upon that authority.”

4.4 EMPLOYER’S AUTHORTIY TO PAY INSURANCE PREMIUM


When an employer, in a group savings linked insurance scheme, undertook to pay monthly
premiums to the insurer from wages or salaries of employees, but when a worker died, it came
to light that the premiums were in default, it was held that the insurer was bound to pay the
insurance money to employee’s family. The employer had become the agent of the insurer for
the agreed purpose. Lack of consideration between the insurer and employer was immaterial
because no consideration is necessary at the time of creation of agency. Consideration is these
cases is promotion of business. This was seen in the case of Naseem Bano v. Life Insurance
Corporation of India.43 In Bowstead and Reynolds on Agency,44 it is stated- “Where a person,
by words or conduct, represents or permits it to be represented that another person has authority
to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing
with him as an agent on the faith of any such representation, to the same extent as if such other
person had the authority that he was represented to have even though he had no such actual
authority.”

42
Section 189 of the Indian Contract Act, 1872.
43
(2004) 2 MPLJ 529.
44
Page 307 (7th Edition).
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4.5 AGENT’S AUTHORITY IN AN EMERGENCY


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.45 Under the English Law, an agency of necessity can arise in the case
of a carrier of goods or a master of ship who, under certain circumstances of necessity, is
empowered on behalf of the ship-owner or the owner of the goods carried to dispose of the
goods or to enter into such other contract as may be necessary, and will be considered to have
their authority to do so. The agency of necessity is frequently used to describe cases where one
person, in an emergency, performs services or incurs expenditure to preserve the property or
rights of another and seeks reimbursement,46 or when a person claims to be protected against
an action for wrongful interference with the property of another by pleading necessity. 47

4.6 AUTHORITY OF SPECIAL AGENTS


An auctioneer is an agent to see property at a public auction. He cannot sell by private contract
as seen in the case of Mews v. Carr.48 Auctioneers have the authority to see but not to give
warranties as to the property sold.60 He cannot sell on credit and has to act both for seller and
buyer and, therefore, can sign the contract for both.49 A factor is an agent who has possession
of the goods, authority to sell them in its own name, and a general discretion to their sale.50 He
can warrant them if it is usual to do so, and to fix the selling price and to receive payment .A
broker is an agent primarily employed to negotiate a contract between two parties. A broker
for sale has not got possession of the goods to be sold. A broker may sell the goods in his own
name and receive payments but cannot disclose the name of the principal. He may sell on
reasonable credit.

The judgement of the Supreme Court in the case of Abdulla Ahmed v. Animendra Kissen
Mitter51 makes the situation clear: “A house or estate agent is in a different position from a
broker at the stock exchange owing to the peculiarities of the property with which he has to
deal and which does not pass by a short instrument as stocks and shares do, but has to be
transferred after investigation of title as to which various stipulations, which might be of a

45
Section 189 of the Indian Contract Act, 1872.
46
Exall v. Partridge (1799) 8 T.R. 308.
47
Sachs v. Miklos [1948] 2 K.B. 23.
48
(1856) 1 H&N 484.
49
Emerson v. Heclis (1809) 11 RR 520.
50
Anson Law of Contract Page 673 (28th Edition).
51
AIR 1950 SC 15.
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particular concern to the owner, may have to be inserted in a concluded contract relating to
such property. The parties, therefore, ordinarily contemplate that the agent should have the
authority to complete the transaction in such cases. That is why it has been held both in England
and here, that the authority given to a broker to negotiate a sale and to find a purchaser, without
furnishing him with all the terms means ‘ to find a man willing to become a purchaser and not
to bind him and make him a purchaser’.
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5 MERCANTILE AGENT AND ITS TYPE-


A mercantile agent is a person who is appointed by those in business to act on their behalf or
to represent them in dealing with other persons. The person on whose behalf he acts as an agent
is known as the ‘Principal’. He has the authority to buy and sell goods on behalf of his principal
or to consign them for the purpose of sale; He does not do business for himself, but he only
represents his principal in all business dealings; He is a link between the principal and the third
parties in so far as the business transactions are concerned; He is a business intermediary
between the manufacturer and the ultimate consumer who helps in the transfer of goods without
actually acquiring the ownership of the same; He is entitled to a commission from his principal,
as a monetary consideration for his services.

5.1 KINDS OF MERCANTILE AGENT-


 On the basis of rights, and
 On the basis of functions.
5.1.1 on the basis of rights-
 General Mercantile Agents, i.e. an agent who has full authority to perform all
functions relating to the business on behalf of his principal. All such acts shall be
binding on the principal. Examples of general mercantile agents are factors,
commission agents, branch managers, etc.

 Special/Particular Mercantile Agent, i.e., an agent appointed to perform a special or


a particular job for his principal. As soon as the particular work is done, he ceases
to be an agent.

5.1.2 On the basis of function-


 Factors- In the words of Storey, “A factor has been defined as an agent employed
to sell goods or merchandise consigned or delivered to him by his principal for
compensation.” Thus a factor is a general agent who sells the goods delivered to
him in his own name on a commission basis.
 A commission agent is one who acts on behalf of his principal in buying and selling
of goods in return for a commission. He makes purchases and sells in his own name,
but does not bear the trade risks. He has expert knowledge about the goods in which
he is dealing and also knows the market trends in the particular commodity.
 A del credere agent guarantees his principal for the payment for all the goods he
sells irrespective of the payment received by him or not and for his additional risk
which he bears, he is entitled to an additional commission over and above his
normal commission. The extra commission paid for such a guarantee is called “del
credere commission.” Thus the principal of a del credere agent is guaranteed the
payment of the sale proceeds of the goods in full.
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 In the words of Storey, a broker has been defined as, “an agent employed to make
bargains and contracts in matters of trade, commerce or navigation, between two
parties for a compensation, commonly called brokerage.” He is a person whose
main job is to arrange a buyer for a seller and vice versa, that is to say, the work of
a broker is finished the moment a deal materialises between an intending buyer and
a protective seller. Usually, a broker does not take possession of title to goods, but
only negotiates for their use.
 An auctioneer is a special mercantile agent who sells the goods of his principal by
auction. He gets the possession of the goods and gives prior publicity to the time
and place of auction through daily newspapers, pamphlets and catalogues.
The goods to be sold by auction are displayed at the place of auction for the benefit
of the intending buyers. The seller usually quotes the minimum price from where
the auctioneer starts his sale. The lowest price is known as “UPSET PRICE”.
Auction sale may be “WITH RESERVE” and “WITHOUT RESERVE”. In case of
auction “with reserve”, no sale can take place below the minimum price fixed by
the seller which is known as “Reserve Price”. In case of auction “without reserve”,
the auctioneer is bound to sell the product to the highest bidder.
The price for which the bid is accepted is called ‘Knocked down price”, since the
acceptance of a bid by auctioneer is indicated by striking a hammer on the desk by
the latter. After the highest bid is accepted, the auctioneer becomes the agent for
both seller and buyer. For his services, the auctioneer is entitled to a commission,
which is a certain percentage of the sale proceeds, usually fixed between him and
the seller, prior to the auction.
 Underwriters are persons who guarantee a company that in case the public does not
subscribe to the entire shares offered by it, they shall subscribe and pay for the
balance of shares specified in the underwriting agreement.
Thus underwriters remove the fear of non-subscription of shares of a company by
the general public since they undertake to buy the shares which the public does not
buy. The underwriters are entitled to an underwriting commission, which is not to
exceed 5% in case of shares and in case of debentures it is 2.5% (the maximum rates
fixed by the Indian Companies Act, 1956)
 Such agents despatch goods to foreign countries on behalf of their principals and
play an important part in the international trade transactions. They take possession
of goods in the home country and then arrange for its shipping and insurance before
despatching them abroad.
 They assist their principals in importing goods from abroad. They take delivery of
goods when they arrive at the port of destination and after paying the import and
custom duties along with port dues, arranged for their transportations to their
principal’s warehouses.
 A warehouse keeper is an agent who keeps the goods of his principal in storage in
his godown, in return for storage charges, to be delivered to the person directed by
the principal. He can exercise his right of lien on goods in his possession in case his
charges are unpaid by the principal.
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6 AGENT EXCEEDING AUTHORITY


When an agent does more than he is authorised to do and when the two can be separated, so
much only of what he does as is within his authority is binding as between him and his
principal.52If the act cannot be separated from what is within it, the principal is not bound to
recognize the transaction. Any notice given to or information obtained by the agent, provided
it be given or obtained in the course of business transacted by him for the principal, shall have
the same legal consequences as if it had been given to or obtained by the principal.
Misrepresentations made, or frauds committed, by agents acting in the course of their business
for their principals, have the same effect on agreements made by such agents as if such
misrepresentations or frauds had been made or committed by the principals. If the principal has
authorised a false statement to be made or knows that it is being made by the agent or keeps
the real facts from the agent, the principal is liable. L.C.B. Gower has stated the position of
English Law in the following words: “The law is that a principal is not liable for fraud in respect
of his agent’s acts unless

a) He intends or knowingly permits the agent to make a false statement, or

b) His agent acting within the actual or apparent scope of his authority makes a statement with
knowledge of its falsity or recklessly not caring whether it be true or false.” It is worthwhile
mentioning the agent’s torts here as well. The case of Atlantic Die Casting Company v. Whiting
Tubular Products53 gives us an idea about it: “The doctrine of ‘respondent superior’ (let the
superior answer) will be applied to make the principal liable where the agent commits a tort
while engaged in the business of the principal.”

52
Section 227 of the Indian Contract Act, 1872.
53
Inc. 337 Mich 414.
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7 CONCLUSION-
Over the years, it has been seen that an agent plays several roles in a contract. He has to step
into the shoes of the principal yet is excluded from liability for his actions in general. Hence,
the limits of his authority have been a question of debate and pondering for several decades
since the emergence of the Agent-Principal relationship idea. Several judges over a span of
time, in various cases that have been covered in the research paper have expressed varying
opinions and views regarding the authority of an agent. In lieu of simplifying the task of
deciding this authority, several classes of agents were also identified. The responsibilities and
underlying powers of these agents differ, depending on the work they carry out.

Agency has got the power to delegate authorities and power to act on behalf of the promoters
and the company. Now principle is the person who bestows the authority to the agent. The
agent connects the agency and the principle. Here the powers have to be used in a rightful way,
because all the three parties are involved and all the three parties are responsible for the breach
of contract. The agency has to be honest. The agent has to be honest and sincere and the
principle also has to be honest in order to fulfill the requirement as laid down by the law of
contract. The law of contract bestows the right of positive faith and trust for the transaction of
intangible services to the customers.
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8 BIBLIOGRAPHY-
primary source-
 Indian contract act 1872, bare act.

Secondary sources-
 R.K Bangia, Indian contract act II, Allahabad law agency.
 Avtar singh, Indian contracts act II, 10th edition.
http://docs.manupatra.in/newsline/articles
www.Agency-Indian-Contract-Act-1872.pdf
www.lawtimesjournal.in
www.legalmatch.com