1. LAW OF AGENCY

2. CONTENTS
• Definition of agency
• Essentials of contract of agency
• Classification of agents
• Rights and duties of agents and principal
• Creation of agency
• Termination of agency

3. Definition of Agency
Law relating to Agency is contained in
chapter 10 of the Indian Contract Act, 1872
(sections 182 to 238).
“Agency is a contractual relation between
two parties created by agreement express or
implied”.
The relationship of agency arises whenever one
person called Agent has authority to act on
behalf of another called Principal.

4. Essentials of contract of Agency
1. The relationship of an agency is based upon a contract.
2. The contract may be either express or implied.
3. There should be the appointment of an agent by the
principal.
4. The person employing the agent must himself have legal
capacity or to be competent to do the act for which he
employs the agent.
5. The principal should confer authority on the agent to act
for him.
6. Relationship of the agency is based on confidence
between the principal and the agent.
7. A contract of agency requires no consideration(sec 185)

5. Classification of Agents
1. On the basis of authority
Express or implied agents
General, specific or universal agents
Agent or Sub-Agent
2. On the basis of nature of work
Mercantile agent
Non-mercantile agent

6. Classification of agents on the basis of
nature of work
Mercantile agents Non-mercantile agents
Banker Attorneys
Factor Solicitors
Broker Promoter
Auctioneer Wife
Commission agent Insurance agents
Del-Credere Clearing and forwarding agents

7. RIGHTS,DUTIES AND LIABILITIES OF AN AGENT
Rights of an Agent:
1. An agent is entitled to receive agreed remuneration. 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 (Sec.219).
2. A agent may retain out of any sums received on account of the principal in the business of
agency, or all money due to himself respect of advance made or expenses properly
incurred by him in conducting such business and also such remuneration as may be
payable to him for acting as agent (Sec.217).
3. the absence of any contract to the contrary, the agent is entitled to particular lien i.e., right
to retain goods, papers (documents) and other property, whether movable or
immovable, of the principal received by him, until the amount due to himself for
commission, disbursements and services in respect of the same has been paid or
accounted for him (Sec.221).
4. Under certain circumstances, an agent can stop the goods in transit.
5. The employer of an agent is bound to idemnity him against the consequences of all lawful
acts done by such agent in exercise of authority conferred upon him. (Sec.222).
6. The principal must pay compensation to his agent in respect of injury caused to such agent
by the principal’s neglect or want of skill (Sec.225).

8. Duties of an Agent:
1. To follow the instructions of the principal.
2. To work with reasonable skill and diligence.
3. To render proper accounts.
4. To communicate with the principal in difficult
situations.
5. Not to deal on his own account.
6. To pay all sums.

9. Duties conti..
• Not to set up adverse title.
• Not to delegate his authority.
• Not to use agency information against
Principal.
• Agent’s duty on termination of agency by
principal’s death or insanity.
• Not to put himself in position where interest
and duty conflict.

10. PERSONAL LIABILITIES OF AN AGENT
General Rule(Sec.230): In the absence of any contract to that effect, an agent cannot
personally enforce contract entered into by him on behalf of his principal, nor is he
personally bound by them.
:
Circumstances under which an Agent becomes personally liable
In case of Foreign In case of In case of In case of
Principal Undisclosed Principal Incompetent Principal Principal not in
(Sec.230) (Sec.230) (Sec.230) existence
In case of acts not In case of acts in In case of express In case of custom
ratified (Sec.235) his own name agreement or usage of trade

11. Misrepresentation and fraud by Agents: Misrepresentation
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. But misrepresentation
made, or frauds committed, by agents, in matters which do not fall
within the scope of authority, do not affect their principal (Sec.238).
Money received by agent by playing fraud on third
person: Where an agent received the money from the third person
by fraud and paid it to the principal, the third cannot sue the
principal unless the latter aware of the fraud or had means of
knowing that it was the third person’s money.

12. CREATION OF AGENCY
MODES OF CREATING
CONTRACT OF AGENCY
By express By implied By By operation
authority authority ratification of law
By estoppel
By holding out
By necessity

13. Implied Agency: Includes
A. Agency by estoppel: An agency may be implied
from the conduct of the parties, though no
express authority has been given.
B. Agency by holding out: Where a person permits
another by a long course of conduct to pledge
his credit for certain purposes, he is bound by
the act of such person in pledging his credit for
similar purposes.
C. Agency by necessity: sometimes extraordinary
circumstances require that a person who is not
really an agent should act as an agent of
another.

14. AGENCY BY RATIFICATION
• Ratification is a kind of affirmation or approval
of a previous unauthorised act or acts relating
to a contract.

15. TERMINATION OF AGENCY
Agency may be terminated in the same manner as any
other contract:
• By the operation of law
• By the acts of the parties

16. Termination of agency by acts of the parties
1. By agreement between principal and agent
2. By revocation of the agent’s authority by the
principal
3. By renunciation of business by the agent

17. Termination of agency by operating of law
1. By performance of the contract of agency
2. By efflux of time
3. By death or insanity of the agent or principal
4. By the insolvency of the principal and in some
cases that of the agent
5. By the destruction of the subject matter of agency
6. Where the principal or the agent is an incorporated
company by its dissolution
7. By the principal becoming an alien enemy

18. Effect of Termination
As between the principal and the agent, termination
of agency is effective only when it becomes known to
the agent, but so far as third parties are
concerned, termination of agency takes effect when
it is known to them

19. Irrevocable agency
When a agency cannot be terminated is said to be an
irrevocable agency
Circumstances
when the agency
is irrevocable
Where the agent
When the agency Where the agent
has partly
is coupled with has incurred a
exercised his
interest personal liability
authority

20. Power of Attorney
A Power of Attorney is an instrument or a deed by
which a person is empowered to act for and in the
name of the person executing it. The person
executing the deed is known as the Principal or
donor and the one in whose favour it is executed is
the agent, or the power agent or the power of
attorney agent