Contract of Agency

PRESENTED TO: PRESENTED BY:

Ms. Shinu Vig Kushagra Kansal (BM-018253)
Ritu Kumari (BM-018263)
Sagar Bhardwaj (BM-018273)
Sanyam Goel (BM-018283)
Shikha Singh (BM-018293)
Shobha Akhuli (BM-018303)
 Introduction to Agency law
• Agency refers to the relationship between a person or agent that acts on behalf of
another person, company, or government, usually called the master or principal.

• An agency is formed when a principal asks an individual to make a delivery or names

someone as an agent through a contract leading to the responsibility of the principal for
actions made by the agent while the agent's actions are akin to those of the principal.

• The form of agency can be, and often is, enforced by written agreements made through
a power of attorney.
An agency relationship is generated
by the consent of both the agent
and the principal. No person can
unwittingly become an agent for
another.

A written contract is common, but

not necessarily essential when it is
clear that both parties intend to act
in their respective. The intent of the
parties can be inferred from their
words or implied by their actions.
 AGENCY

By expressed By implied By By
agreement agreement necessity ratification
1. By express agreement – authority is given to an agent in written or by words of mouth. He
can bind the principal to the third parties by his acts to the extent he is delegated with the
authority.

2. By implied agreement
a. Agency by Estoppel – Where a person permit another to act on his behalf. Principal is
estopped from denying his agent’s authority.

Example- A tell B in the presence of P that A is the agent of P. P does not contradict the
statement. B enter into the contract with P on the belief that A is P’s agent. In such case P
would be bound by the contract.
 He is not the agent
 He ceases to be an agent
b. Agency by holding out – Some positive conduct of the principal indicates that a particular
person is his agent. P sends A to buy goods on credit from C. A buys goods on credit for
himself & refuses to pay. C sue P. P cannot plead that A had no authority.
3. Agency by necessity – When an agency is created by the circumstances. The
impossibility of getting the instructions from the principal is the basis of creation of
agency by necessity.
Example- X sent some horses to Y through a railway company. But Y did not take the
delivery of the horses at the destination with the result the railway company had to feed
the horses. Held, the railway co. was an agent of necessity & could recover the amount
spent on feeding the horses.

4. Agency by ratification – Ratification means subsequent adoption or acceptance by a

person of an unauthorized act done by another on his behalf without any authority.
X buys 5 bags of wheat on behalf of Y without his knowledge or authority. Y would be
bound by the contract, if he ratify or accept the same. It can be expressed or implied
 To test whether a person is or not an
agent…
• The essential condition is that whether he is clothed with a necessary
authority by another (principal) to bind him & make him (principal)
answerable to the third persons & thus establishing a privity contract
between that third person & the principal.
• If this condition is satisfied then a person is considered as an agent.
 Classification of agents
Special Agents – who is employed to do some particular act or represent his principal in
some particular transaction. As soon as the act is performed the authority of agent comes
to an end. E.g. An agent engaged to sell a house.

General Agent – who is employed to do all such acts which are connected with the
business of trade of his employer. If principal limits authority secretly, he
himself will be bound

Universal Agent – is one who is employed to all such act which a principal can lawfully do
& can delegate. Agent has unlimited authority.
FROM THE POINT OF VIEW OF NATURE OF WORK TO BE PERFORMED:

1. Factors – is a mercantile agent to whom the possession of goods are given for the purpose
of selling them. He usually sells the goods in own name. He can exercise a general right of
lien on the goods delivered to him for balance of payment if any.

2. Auctioneer – is an agent who is appointed by the principal to sell the goods on his behalf
at a public auction for a reward in form of commission. Example- reserve price

3. Broker – is an agent appointed by the principal for the purpose os selling or buying goods
on his behalf. He do not have possession of goods nor he can contract in his own name. He
bring seller & buyer together to bargain. He gets commission ( brokerage ).
4. Commission Agent – is a mercantile agent who is employed to buy & sell goods for his
principal on best possible terms. He transact in his own name. He is entitled to commission.
He may or may not have possession.

5. Del credere Agent – is one who guarantees to his principal, the performance of the
financial obligation by party with whom he enters into a contract on principal behalf, in
consideration of an extra commission. He becomes surety & become liable on the default of
third party.

6. Banker – act as a mercantile agent on behalf of his customer when he collects cheques,
drafts, bills & pay insurance premium & buy or sells ecurities.
 Duties of an Agent
1. Duty in conducting principal’s business- The agent should conduct the business of the
principal as per the directions of the principal or in the absence of any direction as per the
custom prevalent in the business.

2. Duty to carry out the work with reasonable skills and diligence- The agent must
conduct the business of the agency with as much skill as is generally possessed by persons
engaged in similar business, unless the principal has notice of his want of skill. Further, the
agent must act with reasonable diligence and to the best of his skill.
Example- ‘A’ acts an agent for ‘B’ and sells rice to ‘C’ in the usual course of business
without verifying about C’s solvency and if ‘C’ goes insolvent, then ‘A’ is responsible for
loses arising to ‘B’.
3. Duty to render account- It is the duty of an agent to keep proper accounts of his
principal’s money or property and render them to him on demand, or periodically if so
provided in the agreement.

4.Duty to communicate- 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, before taking any steps in facing the difficulty or emergency

5. Duty not to deal on his own account- An agent must not deal on his own account in the
business of agency; i.e., he must not himself buy from or sell to his principal goods he is
asked to sell or buy on behalf of his principal; without obtaining the consent of his principal
after disclosing all material facts to him.
Example- ‘A’ directs ‘B’ to sell his estate. ‘B’ buys the estate for himself in the name of ‘C’.
‘A’, on discovering that ‘B’ has bought the estate for himself, may repudiate the sale, if he
can show that ‘B’ has dishonestly concealed any material fact or that the sale has been
disadvantageous to him.
6. Duty not to make any profit out of his agency except his remuneration- An agent
stands in a fiduciary relation to his principal and therefore he must not make nay profit
(secret) out of his agency. He must pay to his principal all moneys received by him on
principal’s account. He can, however, deduct all money due to himself in respect of his
remuneration or/and expenses properly incurred.

7. Duty on termination of agency by principal’s death or insanity- When an agency is

terminated by the principal dying or becoming of unsound mind, the agent must take, on
behalf of the representatives of his late principal, all reasonable steps for the protection
and preservation of the interests entrusted to him.

8. Duty not to delegate authority- An agent must not further delegate his authority to
another person, but perform the work of agency himself.
Rights of an Agent
1. Right of Retainer: Agent has right to deduct the amount which is due to him by principal,
from amount payable to principal.

2.Right of stoppage in transit: In case where agent is personally liable, he has right to stop
the goods in transit. The good may be moving towards customer or principal

3. Right to claim Remuneration: As per the terms of agency contract, agent has rights to
claim remuneration.
4. Right of Indemnity: Principle of indemnity gets operated between principal and agent
where principal is implied indemnifier and agent is implied indemnity holder. So agent can
make principal answerable for all types of sufferings.

5. Right of lien: Agent can exercise right of lien but contract act has not specified whether it
is general lien or particular lien.Therefore the nature of agent’s lien depends upon mutual
understanding.
Bar Bouncer Agency Example
There is a bar called Owen’s Pub. The owner, Owen, hires a bouncer, Ben, to keep order in
the pub. Owen gives Ben authority to throw visitors out of Owen’s Pub if they cause any
violence. Owen is therefore the principal and Ben is his agent.
Ryan, a local town drunk, enters the bar one night and starts a fight with another customer
for no good reason. Ben, the bouncer, sees Ryan throw the first punch and Ben immediately
grabs Ryan and throws him outside on the curb. Ben injured Ryan by tossing him out the
door and Ryan now wants to sue. Who can Ryan sue?
Ryan sues Ben, because Ben injured him. However, can Ryan sue Owen? This depends on the
nature of the relationship between Owen and Ben. As mentioned earlier, Owen is the
principal of Ben. As long as Ben acted within the scope of his employment on behalf of
Owen, Ryan could sue Owen as the principal of Ben. In other words, Ryan would sue Owen
because Owen authorized Ben to throw Ryan out of the bar. In the eyes of the law, Owen is
liable for the actions of Ben.
However, Owen and Ben would both argue that they’re innocent because Ryan deserved to
get thrown out. And Owen and Ben are likely right, and if so, neither would be liable.
However, if a jury or judge determined that Ben acted unreasonably and was liable to Ryan,
then Owen would be liable too.

Now, assume that Ben walked up to Ryan and beat him up for no legitimate reason
whatsoever. In this case, Owen would not be liable for Ben’s actions because Ben would be
acting outside the scope of his employment. So, keep in mind that a principal is only liable
for the actions of his or her agent if the agent acts within the scope of his or her
employment! This is a concept that often confuses many people.
THANK YOU