Contract of agency

Suvadip Chakraborty

SUVADIP CHAKRABORTY/ NSHM DURGAPUR 8/16/2012 1

“ person employed to do any act for another
or to represent another in dealings with third
person”


„ Qui facit per alium facit per se‟
 (He who does by another does by himself)


A major individual with sound mind
 A Partnership firm
 A company


 Yes.
 Butthe principle cannot hold the agent
liable for negligence or misconduct


1. Express Agency (Sec 187)- Appointed by
word of mouth or by writing
2. Agency by Ratifications (Section 196 to 200)
3. Implied Agency (Sec 187)- Appointed by
conduct, situation or relationship of parties
a) Agency by Estoppel (Sec 237)
b) Agency by Holding Out
c) Agency of Necessity (Sec 189)


 An act performed by the agent beyond the scope of
his authority, if approved by the principal, is called
agency by ratification
 Example
Mrs. Ankita Sharma bought 1 neck tie amounting to
Rs.500 from the local garment shop on credit saying
that his husband, Mr. Angad Sharma will pay for the
same after 5 days. The neck tie was bought for the
purpose of use by Mr. Angad Sharma. Mr. Angad
Sharma did not know about the purchase till he was
approached by the shop keeper for the payment
after the expiry of 5 days.He paid the due amount of
money to the shop keeper on the spot. On returning
to his home, he enquired Mrs. Ankita Sharma about
the purchase. She confirmed about the same to her
husband.


 Features
1) Act must have been done on behalf of the person ratifying
2) The principal must be in existence at the time of the act that is to be
ratified
3) The ratifier should be competent to ratify the act
4) The transaction must have been subsisting at the time when it is
ratified
5) The principal must have signified his unconditional acceptance of the
act
6) Ratification may be expressed or implied
7) Ratifications must have been made with full knowledge of all the
material facts
8) Whole transaction must be ratified
9) Ratification must be made within a reasonable time
10) Act to be ratified should not be void or illegal
11) Ratification must be communicated
12) Ratification must not injure the 3rd person
13) Ratification relates back to the date of act of the agent


 Person by his conduct or statements induced
others to believe that a certain person is his
agent
Example
Amit owns a shop in Ranigunje, living himself at Durgapur, and
visiting the shop occasionally. The shop is managed by Banti and
he is in the habit of ordering goods from Cyril in the name of
Amit for the purpose of the shop, and of paying them out of
Amit’s funds with Amit’s knowledge. Banti has an implied
authority from A to order goods from Cyril in the name of Amit
for the purpose of the shop.

 Some affirmative conduct by the principal is
necessary in creation of agency by holding
out
 Eg: P allows his servant A to buy goods on
credit from C and pays them regularly. On
one occasion, P pays cash to A for purchase
of goods by cash. A pockets the money and
purchases the goods on credit. C can recover
the sum from P since through previous
dealings P has held out his servant A as his
agent


 Ariseswhen there is no express or implied
appointment of a person as agent for another
but he is forced to act on behalf of a
particular person
Example
Amit , truck driver was taking a consignment of live cattles in
his truck from Sonepur to Kolkata. There was a road block along
the road near Kolkata.He was held for 10 days as a result of the
road block.The live stocks had to be fed during the 10 days of
held up. The driver should be compensated for the expenses of
feeding by the consignee.

1. Mercantile Agents or Commercial Agents
2. Non Mercantile Agent or Non- Commercial
Agent


 Types
1. Broker
2. Factor
3. Commission Agent
4. Del Credere Agent
5. Auctioneer
6. Banker
7. Pakka and Katcha Adatias
8. Indentor


 Engaged to buy or sell property or make
bargains and contract between the engager
and 3rd party
 He is entitled for commission for this
(brokerage)


 Entrustedwith the possession of the goods
with a authority to sell them


 Engaged to buy or sell goods for a
commission
 May have the possession of the goods
 He has particular lien to the goods


 Guarantees the performance of the contract
for an extra remuneration
 Occupies the position of guarantor as well as
an agent


 Appointed as an agent to sell goods by
auction


 Banker is an agent of the customer when it:
1. buys or sells securities on his behalf
2. collects cheques, bills, interest, dividend
3. pays insurance premium out of the
customer‟s accounts on the customer‟s
order


 Pakka Adatias- Guarantees the performance
of the contract to the principal as well as to
the broker on the other side
 Katcha Adatias- Guarantees performance on
part of the principal to the broker


 Procures
sale or purchase for his principal for
a commission with a merchant in a foreign
country


 Wife
1. If wife and husband are living together
2. If wife and husband are living separately
a) No fault of the wife – The husband is bound
to pay her for necessities as she is the
agent of her husband
b) Fault of the wife- The husband is not bound
to pay her for necessities as she is not the
agent of her agent


1. To conduct the business of agency according to the principal‟s
direction (S. 211)
2. The agent should conduct the business with the skill and
diligence that is generally possessed by person engaged in
similar business (S. 212)
3. To render proper accounts (S. 213)
4. Not to make any secret profits
5. Not to deal on his own account
6. Agent is not entitled to remuneration for business
misconducted
7. Should not disclose confidential information
8. When the agency is terminated by the principal dying or
becoming of unsound mind


1. Right to Remuneration (S. 219 to S. 220)
2. Right of Retainer (S. 217)
3. Right of Lien (S. 221)
4. Right of stoppage in transit
5. Right of Indemnification (S. 222-224)
6. Right to compensate for injury caused by
principal‟s neglect (S. 225)


1. Bound to indemnify the agent against the
consequences of all lawful acts done by such agent
in exercise of the authority conferred upon him (S.
222)
2. Liable to indemnify an agent against the
consequences of an act done in good faith, though
it causes an injury to the rights of a third person (S.
223)
3. The principal is, however, not liable for acts which
are criminal in nature though done by the agent at
the instance of the principal (S. 224)
4. The principal must make compensation to his agent
in respect of injury caused to such agent by
principal‟s neglect or want of skill (S. 225)


1. “ contracts entered into through an agent,
and obligations arising from acts done by 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”


2) The act of the agent is binding for the principal which has been
performed by the agent within his scope of authority (in case the
separation between the activities within the agent‟s authority
and outside his authority is possible)
4) The act of the agent is not binding for the principal which has
been performed by the agent within his scope of authority (in
case the separation between the activities within the agent‟s
authority and outside his authority is not possible)
5) The act of fraud and misrepresentation by the agent is binding
for the principal which has been performed by the agent within
his scope of authority
6) The principal remains liable to the 3rd parties even if the
principal‟s name has not been disclosed
7) The liability of the principal continues even in cases where agent
is held personally responsible


 Agent can personally enforce contracts entered into by him on
behalf of the principal, and he is personally bound by them only
if there is an agreement to that effect (S. 230)
 An agent is personally liable in the following cases:
1. Breach of Warranty
2. Where an agent expressly agrees to be personally liable
3. Where an agent signs an negotiable instrument in his own
name
4. An agent with a special interest or with a beneficial interest
(factor or auctioneer) can sue and can be sued personally
5. When an agent is guilty of fraud or misrepresentation in
matters which do not fall within his authority
6. Where the agency is one coupled with interest


1. By revocation by the principal
2. On the expiry of fixed period of time
3. On the performance of the specific purpose
4. Insanity or death of the principal or agent
5. Insolvency of the principal
6. By renunciation of agency by the agent


Contract of agency

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