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Presentation on Law of Agency

and Bailment, I ndemnity and

Sk. Nazibul Islam
Faculty Member,BIBM
An agency relationship arises when one
person(the agent) acts for the benefit of and
under the direction of another(the principal)
Agency relationship is usually formed by
Agent & Principal
An agent is a person employed to do any
act for another or to represent another in
dealings with third persons.-Sec.182
The person for whom such act is done or
who is represented is called the principal.
P appoints X to buy 100 bales of cotton on
his behalf. P is the principal and X is his

The relationship between P and X is called
Power of Attorney
An agent may be appointed by the principal,
executing a written and stamped document.
Such a document is called Power of
There are two kinds of power of attorney:
General and Special.
A general power is one by which the agent
is given an authority to do certain
objectives, e.g., managing an estate or a
A special or particular power may be
appointed by which an agent is authorized
to do a specific thing e.g., selling some
Enforcement and consequences of
Agents contracts
The function of an agent is to bring about
contractual relations between the principal
and third parties.
Usually agents are appointed with specific
instructions and authorized to act within the
scope of their instructions.
Acts of the agent within the scope of the
instructions bind the principal as if he has
done them himself.
There is a legal maxim regarding agency
He who does through another does by
The act of an agent is the act of the
Contracts entered into through an agent,
and obligations arising from acts done by an
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.-
Who can appoint an Agent?
Any person who is of the age of majority
according to the law to which he is subject,
and who is of sound mind, may employ an
Who may be an Agent?
Any person may be an agent, even a minor. A
minor acting as an agent can bind the principal to
third parties.
But a minor is not himself liable to his principal.-
Joint Principals: Several principals can jointly
appoint one agent. The agent can act in respect of
those affairs in which all the co-principals are
jointly interested.
Classes of Agents
A Commission Agent
A Del credere Agent i.e. (Risk taker)
General Agent and Particular Agent
Broker brings buyer and sellers into
contract with one another against
Factor is a mercantile agent who kept
goods for sale and has got
discretionary power to enter into
contract of sale with third party.
Commission Agent is one who secures
buyers for a sell of goods in return for
a commission.A commission agent
may have possession over the goods or
An Auctioneer is one who is authorized to sell
goods of his principal by auction. He has a
particular lien on the goods for his remuneration.
He has the goods in his possession and can sue the
buyer in his own name for the purchase price.
An auctioneer acts in a double capacity. Up to the
moment of sale he is the agent of the seller. After
the sale he is the agent of the buyer. An auctioneer
has implied authority to sell the goods without any

A Del Credere Agent is one who for
extra remuneration guarantees the
performance of the contract by the
other party, if the party fails to perform
as per agreement then Del credere must
pay compensation to the principal.

General Agent represents the principal
in all matters concerning a particular
business. Factors and commission
agents are usually general agents.
Particular Agent who is appointed for
a specific purpose e.g., to sell a
particular article or time.

Agency Creation
Agency by express agreement
Agency by implied agreement

Express Agency
An agency that occurs when a principal and
an agent expressly agree to enter into an
agency agreement with each other.
Exclusive agency contract
Power of attorney
Express agency contracts can be either oral
or written unless the Statute of Frauds
stipulates that they must be written.

I mplied Agency

An agency that occurs when a principal and an
agent do not expressly create an agency.
The agency is implied from the conduct of the
The extent of the agents authority is determined
from the particular facts and circumstances of the
particular situation.
Incidental authority

Agency by Ratification
An agency that occurs when:
1. A person misrepresents himself or herself
as anothers agent when in fact he or she
is not, and
2. The purported principal ratifies (accepts)
the unauthorized act.

Agents Duties to Principal
Conduct the business according to the
direction of the principal
To carry out business with reasonable care
and skill.
Render proper accounts.
Communicate with principal and seeking
Refund the benefit for illegal transaction on
principals own account.

Agents Duties to Principal (cont.)
To pay sums received for principal.
Protection of the interest at the death or
insanity of the principal.
Supply information to the principal.

Rights of Agent
Enforcement of rights
Right to receive remuneration
Agent not entitled to remuneration for
business misconducted
Agents lien
Right of stoppage of goods in transit
Right to receive damage for negligence or
inefficiency of principal.

Termination of Agency

Termination of Agency by the act of the
Mutual agreement
Revocation of agents authority by principal
Renounce of authority by agent

Termination of Agency by the Operation of Law:
By performance of the contract
By lapse of time
By death of any party
By insanity of any party
By insolvency of any party
By supervening impossibility

Bailment is the delivery of goods from one
person to another for some purpose with a
contract, when the purpose is accomplished
goods will be returned.
Characteristics or Requisites of
Delivery of goods
Moveable goods
Other elements of contract
Duties of the Bailor
To disclose faults in goods bailed

Payment of expenses in gratuitous bailment

To receive back the goods

Rights of Bailee

Right to know the fault of bailed goods

Right to get damage & expenses

Bailees lien

Types of Bailment
Gratuitous Bailment:A gratuitous bailment is
one in which neither the bailor, nor the bailee is
entitled to any remuneration, e.g., loan of an
article gratis; safe custody without charge, etc.
Bailment of Reward:A bailment for reward is
one where either the bailor or the bailee is entitled
to remuneration, e.g., a motor car let out for hire;
goods given to a carrier for carriage at a price;
articles given to a person for being repaired for a
remuneration; pawn etc.

Duties of the Bailee
To take reasonable care of the bailed goods
Return of bailed goods
Not unauthorized use of bailed goods
Not mixture the bailed goods with bailors
own goods
Return of accretion to the goods bailed

Guarantee is a promise normally given by a
third person to the lender for the present or
future debt of the borrower.
Person who gives the guarantee is called
surety or guarantor.To whom guarantee is
given is called beneficiary.

Types of Guarantee
Performance guarantee
Letter of credit
Shipping guarantee
Custom & Excise guarantee
Essential Features of Guarantee
Guarantors liability is secondary
Guarantee may be either written or oral
Guarantee may be Specific or Continuing
Party must be competent to give guarantee
Minor cannot give guarantee
Guarantee must be supported by lawful
A guarantee obtained under misrepresentation,
fraud and undue influence is void able.

Discharge of Surety
Death of the surety
Discharge on variation of terms
Discharge by the performance of the debtor
Discharge by notice of revocation
I ndemnity
Indemnity is defined as a contract by which
one party promises to save the other from
loss caused to him.The person who makes
such promise is called indemnifier and the
other person is called the beneficiary.

Banks and letters of I ndemnity
Loss of term deposit receipt
Issue of duplicate draft
Loss of Travelers Cheque
Loss of safe custody receipt
Loss of gift cheque

Distinction Between Guarantee & I ndemnity
1.Number of parties: In case of guarantee there
are three parties- the principal debtor, the creditor
and the surety. A contract of guarantee requires
the concurrence of the three parties. In case of
indemnity there are only two parties- indemnified
and indemnifier.
2.Number of contracts: In case of guarantee
there are two contracts, one between the principal
debtor and the creditor and the second between the
surety and the creditor. On the other hand, in a
contract of indemnity, there is only one contract
between the indemnifier and the beneficiary.
3.Request: In a contract of guarantee, the guarantor
undertakes his obligation at the request, express or implied,
of the principal debtor; no such request is necessary in
respect of an indemnity.
4.Nature of liability: In a contract of guarantee the
liability of the principal debtor is primary and that of
surety is secondary. The person giving an indemnity is
primarily and independently liable.
5.Purpose of contracts: A contract of guarantee is to
provide necessary security to the creditor against the loan
but a contract of indemnity is made for reimbursement of

6.Right of parties: The surety has the right to
recover from the principal debtor the amount paid
by him under the contract of guarantee, the
indemnifier cannot claim reimbursement from
anybody else.
7.Nature of risk: The surety agrees to discharge
the existing liability of the principal debtor. So it
is a subsisting risk. The indemnifier promises to
save the indemnified against risk of loss
happening in future. So it is a contingent risk.

Thank You