Law of Agency in Pakistan

Introduction
• Law of Agency branch of the Contract Act, 1872
• Chapter 10  Sections 182 to 238
Definition of Agent
• Section 182 of the Contract Act, 1872 is the defining
section of an Agent. It states:

An agent is a person employed to do any act for

another or to represent another in dealing with
third person,
& the person for whom such act is done or who is so
represented is called Principal.

• The contract which creates the relationship of

principal and agent is called “Agency”.
Principal-Agent Relationship
KPRINCIPAL
Principal’s
obligation to
Agency perform
Contract contract

Contract with
third party on
AGENT THIRD PARTY
behalf of the
Principal
Essentials of Agency
• Intention to work for Principal
• No consideration is necessary (section 185)
• Agreement between principal and agent
Who can employ 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 agent.
- Section 183
Who can be an AGENT?
As between the principal and third persons any
person may become an agent, but no person who is
not of the age of majority and of sound mind can
become an agent, so as to be responsible to his
principal according to the provisions in that behalf
herein contained.
- Section 184
 Broker

Classification and
General Agents

Types of Agents
Extent of
Factor
Authority
Special Agents
Commission
Mercantile Agent
Agent
Auctioneer

Banker

Nature of work Del-Credere

performed
Attorney

Solicitor

Non-Mercantile
Insurance
Agent

Wife

Election
• Sub agent: An agent appointed by the original agent is called a
sub agent. He is under the control of the original agent to the
business of the agency (Sec 191).
• Co-agent: When two or more persons are appointed as agents by
the principal to act as such jointly or severally, they are called
Co-Agents. Co-Agents should concur together in exception of
their authority to bind the principal. Unless contrary is proved,
they are jointly responsible. An agent who is appointed as co-
agent must exercise some amount of discretion as a man of
ordinary prudence would exercise in his own case. If he does
this, he is not responsible to the principal for acts of negligence
of the co-agent.
• Substitute agents: (Secs 194 & 195) Where an agent holding an
express or implied authority to name another person to act for
the principal in the business of the agency, has named another
person accordingly, such person is not a sub agent, but an agent
of the principal for such part of the business of the agency as is
entrusted to him. Such as agent is called substitute agent. A
substitute agent is the agent of the principal and as much he is
responsible to the principal.
 Creation of
Agency(Section 187)

Express
Implied Agreement Ratification
Agreement

Holding
Estoppels Necessity
out
Essentials of Ratification

• Full knowledge
• Whole transaction
• No damage to 3rd parties
• Act on behalf of other person
• Existence of Principal
• Within reasonable time
• Lawful acts
• Acts within Principal’s power
• Communication
Rights of an Agent

• Right of Retention (Section 217)

• Right of stoppage in transit Right to claim
Remuneration (Section 219)
• Right of Indemnity (Section 222)
• Right of lien (Section 221)
• Right of Compensation(Section 225)
Duties of an Agent
• Agent should follow the instructions given by the principal. ( Section
211)
• If agent comes across any complicated situation, he has to
communicate that situation to principal and his advice is to be
obtained.(Section 214)
• Agent should behave in his capacity as agent, he should not run the
transaction in his own name.
• Agent should not make secret profits by utilizing reputation of the
principal.
• Agent should safe guard property of principal particularly upon
happening of events like death of principal, insolvency of principal,
etc. (Section 209)
• Agent should maintain proper accounting records to enroll the
transactions run by him. (Section 213)
Liabilities of an AGENT
Actually agents binds over principal to his activities but there are some
situations where agent comes across personal liability. Those situations
are as follows;
• Terms of contract of agency may create personal liability to agent.
• The tradition which is in operation in that particular type of
business. May also create personal liability to agent.
• If agent does not behave in his capacity as agent and thus runs the
transaction in his own way, personal liability arises.
• When agent acts for foreign principal, agent is personally liable
• Pretending agent is personally liable.
• When agent acts for principal who has not come into existence,
agent is personally liable.
• In case where principal cannot be sued, Customer sues agent and
thus agent is personally liable.
• When agency is coupled with interest then also agent is personally
liable.
Rights of Principal
• To recover damages occurring from unlawful
acts and/or exceeding authority
• To obtain accounts of receipts and expenses
• To claim and recover secret profits
• To resist agent’s claim for indemnity against
liabilities incurred
Duties of Principal
• Bound to indemnify against consequences of all
lawful acts done in exercise of authority given
(Section 222)
• Liable to indemnify against consequences of acts
done in good faith (Section 223)
• Compensation in respect of injury caused by
principal’s neglect (section 225)
• To pay the agent the commission or
remuneration agreed
Liabilities of Principal
• Contracts entered into through an agent, and
obligations arising from acts done by an agent,
may be enforced in the same manner and have
the same legal consequence, as if the
contracts had been entered into and the
acts done by the principal himself.
Termination of Agency
• An agency can be terminated in the following ways:

(1) By Agreement:

(2) By Revocation of the Principal:

(3) By Revocation of the Agent:

(4) By completion of the business of agency;

(5) By expiry of the time:

(6) By death of Principal or Agent:

(7) By Insanity of Principal or Agent:

(8) By Insolvency of the Principal:

(9) Principal and Agent becoming alien enemy:

(10) Where it is created by illegal contract.