1. Course facilitator – Ms. Shilpi Gupta 1

2. Agency
General
It is not always possible for a person to do everything himself, hence it
becomes necessary to delegate some of the acts to be performed by
another person. Such other person is called an agent.
Definitions of Agent and Principal
II An agent is a person employed to do any act for another or to represent
another in dealings with third persons. The person for whom such act is
done, or who is represented, is called the principal" .85 The contract
which creates the relationship of 'principal' and 'agent' is called an
'agency'. For example: X appoints Y to buy ten bags of wheat on his behalf,
X is the principal, Y is the agent and the contract between the two is
'agency'.
Course facilitator – Ms. Shilpi Gupta 2

3. General rules of Agency
There are two important general rules regarding agency, viz:
What one person can himself lawfully do, can as well get it done by any other
person. This rule is of course, subject to some exceptions, e.g., in case, of acts
required to be performed personally like marriage.
What a person does by another, he does by himself. In other words the acts of the
agent are, for all legal purposes, the acts of the principal.
Who may employ an Agent
Any person who is competent to contract may employ an agent. A minor or a
person of unsound mind cannot employ an agent."
Who may be an Agent
The Act lays down that "as between the principal and third persons any person
may become an agent";" Thus even a minor or a person of unsound mind can be
appointed as agent, but in such a case the principal shall be liable.
Course facilitator – Ms. Shilpi Gupta 3

4. CREATION OF AGENCY ( Sec. 187)
1. By express agreement.
2. By implied agreement.
3. By ratification/approval.
4. By operation of law.
Course facilitator – Ms. Shilpi Gupta

5. By express agreement
 An agency express agreement or authority arises when
authority is conferred on an agent either by written or spoken
words.
 Case
 A appoints b to manage his business by a written and stamped
deed and B accepted it. It is an agency created by an express
agreement between A & B.
Course facilitator – Ms. Shilpi Gupta

6. By Implied Agreement
 Implied agency inferred from the conduct or relation of the
parties or the circumstances of the case.
Case
 A lives in Kolkata. He owns a shop in jaipur and visit
occasionally. The shop is managed by B. B is in the habit of
buying goods from C in the name of A for the purpose of shop,
and paying from them out of A’s funds with A’s knowledge. B
has an implied authority from A to buy goods from C in the
name of A for the purposes of the shop
Course facilitator – Ms. Shilpi Gupta

7. By Ratification
 Agency by ratification arises when some act is done by a
person on behalf of another without his authority and act
is ratified or affirmed by the other and unauthorised act
become authorised
Course facilitator – Ms. Shilpi Gupta

8. By operating Law
 Agency may also arise by operating of law. In such a
case, law presumes a person as an agent of another. For
instance ever partner is an agent of the firm, for the
purpose of the business of the firm
Course facilitator – Ms. Shilpi Gupta

9. DUTIES OF AGENT
1. To carry out the work undertaken according to the directions given by the
principal.
2. To carry out the work with reasonable care, skill and diligence.
3. To communicate with the principal in the case of difficulty.
4. To pay sums received for the principal.
5. To protect and preserve the interests of the principal in the case of his death or
insolvency.
6. Not to make secret profit from agency .
7. Not to set up an adverse title.
8. Not to use information obtained in the course of the agency against the
principal.
Course facilitator – Ms. Shilpi Gupta
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10. RIGHTS OF AGENT
1. Right of retainer.
2. Right to receive remuneration.
3. Right of lien.
4. Right of indemnification.
5. Right of compensation.
Course facilitator – Ms. Shilpi Gupta

11. TERMINATION OF AGENCY
By act of the parties By operation of law
 Performance of the contract
 Agreement
 Expiry of the time
 Death of either party
 Revocation by the principal  Insanity of either party
 Insolvency of either party
 Destruction of the subject matter
 Revocation by the agent
 Principal becoming an alien enemy
 Dissolution of a company
Course facilitator – Ms. Shilpi Gupta