Agency: An agent is a person employed to do any act for another or represent another in dealings with third persons. The person so re…
Agency:
An agent is a
person employed to do any act for another or represent another in dealings with
third persons. The person so represented is called the principal.
person employed to do any act for another or represent another in dealings with
third persons. The person so represented is called the principal.
The act of the agent binds the
principal in the same manner in which he would be bound if he does that act
himself.
principal in the same manner in which he would be bound if he does that act
himself.
Classes of
Agents:
Agents:
There are two
categories of agents
categories of agents
a)
Sub-agent
Sub-agent
b)
Substituted Agent
Substituted Agent
a) Sub-Agent
He is a person
employed by and acting under the control of the original agent in the business
of the agency.
employed by and acting under the control of the original agent in the business
of the agency.
He acts under the
control of the original agent and between the agent and sub-agent, the
relationship of principal-agent subsists. Sub-agent discharges functions authorized
by the agent in the course of his agency business.
control of the original agent and between the agent and sub-agent, the
relationship of principal-agent subsists. Sub-agent discharges functions authorized
by the agent in the course of his agency business.
Example:
1. Stock brokers
appoint clerks to transact business on behalf of their clients.
appoint clerks to transact business on behalf of their clients.
2. A directs B,
his solicitor, to sell his estate by auction and to employ auctioneer for this
purpose. B names C, an auctioneer,to conduct sale. C is not a sub- agent for
the conduct of the sale.
his solicitor, to sell his estate by auction and to employ auctioneer for this
purpose. B names C, an auctioneer,to conduct sale. C is not a sub- agent for
the conduct of the sale.
b) Substituted Agent
Sometimes, the
principal may ask the agent to name another person to act for the principal in
carrying out a part of the business of agency. Such a person is known as the
Substitute Agent.
principal may ask the agent to name another person to act for the principal in
carrying out a part of the business of agency. Such a person is known as the
Substitute Agent.
For example, Ravindran appoints Suresh
as his agent to collect rent from his tenants. One tenant defaults and
Ravindran wants to initiate legal action against the defaulting tenant. He asks
Sgresh to refer him to a competent lawyer. Suresh names one Mr. Vishwanath, an
established lawyer to represent Mr. Ravindran. Mr. Vishwanath can be termed as
substituted agent.
as his agent to collect rent from his tenants. One tenant defaults and
Ravindran wants to initiate legal action against the defaulting tenant. He asks
Sgresh to refer him to a competent lawyer. Suresh names one Mr. Vishwanath, an
established lawyer to represent Mr. Ravindran. Mr. Vishwanath can be termed as
substituted agent.
Example: A instructs B, a merchant, to
buy a ship for him. B employs a ship surveyor of good reputation to choose a
ship for A. The surveyor makes the choice neglegiently,and the ship turns to be
unseaworthy and is lost. B is not, but the surveyor is responsible to A.
buy a ship for him. B employs a ship surveyor of good reputation to choose a
ship for A. The surveyor makes the choice neglegiently,and the ship turns to be
unseaworthy and is lost. B is not, but the surveyor is responsible to A.
Agent’s duty in
naming such person In selection of a substituted agent for his principal, an
agent is bound to exercise the same amount of discretion as a man of ordinary
prudence would exercise in his own case; and if he does this, he is not
responsible to the principal for the acts or negligence of the substituted
agent so selected.
naming such person In selection of a substituted agent for his principal, an
agent is bound to exercise the same amount of discretion as a man of ordinary
prudence would exercise in his own case; and if he does this, he is not
responsible to the principal for the acts or negligence of the substituted
agent so selected.
Note: The agent is answerable for the
acts of the sub-agent. A sub-agent is the agent of the agent, whereas a
substituted agent is an agent of the principal.
acts of the sub-agent. A sub-agent is the agent of the agent, whereas a
substituted agent is an agent of the principal.
Salient Features of Agency
1) “He, who does
through another, does by himself”.
through another, does by himself”.
It means ‘the
acts of the agent are, for all legal purposes, the acts of the principal.’
acts of the agent are, for all legal purposes, the acts of the principal.’
Example: X purchases from Z goods worth
Rs. 10000 on credit on behalf of Y, now Z can proceed against both X and Y if
the amount is not paid.
Rs. 10000 on credit on behalf of Y, now Z can proceed against both X and Y if
the amount is not paid.
2) The Principal
should be competent to contract.
should be competent to contract.
3) The agent may
not be competent to contract.
not be competent to contract.
4) No
consideration is required to create an agency.
consideration is required to create an agency.
Duties of Agent
1) A Delegate
cannot further delegate, “delegates non potest delegare”
cannot further delegate, “delegates non potest delegare”
It means that an
agent, being himself a delegate of his principal, cannot pass on that delegated
authority to someone else.
agent, being himself a delegate of his principal, cannot pass on that delegated
authority to someone else.
Note: There are however certain
exceptions under this rule.
exceptions under this rule.
2) An agent is
duty bound to follow principal’s direction or customs
duty bound to follow principal’s direction or customs
Case law: Lilley Vs Double Day
A principal
instructed his agent to lodge his goods in a particular warehouse. The agent
however deviated from the instructions. The agent put the goods in another
warehouse, where the goods perished due to fire. Held, the agent was liable.
instructed his agent to lodge his goods in a particular warehouse. The agent
however deviated from the instructions. The agent put the goods in another
warehouse, where the goods perished due to fire. Held, the agent was liable.
3) Duty to show
proper skill and care.
proper skill and care.
Example: A, an agent for the sale of
goods, having authority to sell goods on credit, sells to B on credit, without
making the proper and usual enquiries as to the solvency of B. B, at the time
of the sale,is insolvent. A must make compensation to his principal in respect
of any loss incurred.
goods, having authority to sell goods on credit, sells to B on credit, without
making the proper and usual enquiries as to the solvency of B. B, at the time
of the sale,is insolvent. A must make compensation to his principal in respect
of any loss incurred.
4) Duty to render
proper accounts
proper accounts
An agent owes
duty to render proper accounts to the principal on demand.
duty to render proper accounts to the principal on demand.
5) An agent
should not deal on his own account.
should not deal on his own account.
It means that 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.
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.
Example: Muthiaya directs, Ramu his
agent to buy a certain house for him. Ramu tells Muthiaya that it cannot be bought
and buys the house for himself. Muthiaya may, on discovering that Ramu has
bought the house, compel him to sell it to him at the price he bought it for.
agent to buy a certain house for him. Ramu tells Muthiaya that it cannot be bought
and buys the house for himself. Muthiaya may, on discovering that Ramu has
bought the house, compel him to sell it to him at the price he bought it for.
6) Duty to
communicate with Principal
communicate with Principal
It is the duty of
the agent to communicate with principal with reasonable diligence.
the agent to communicate with principal with reasonable diligence.
Different kinds of Agent
Auctioneers: An auctioneer is an agent
whose business is to sell goods or other property by auction i.e. by open sale.
whose business is to sell goods or other property by auction i.e. by open sale.
Factors: A factor is a merchantile
agent who is entrusted with the possession of the goods for the purpose of
sale.
agent who is entrusted with the possession of the goods for the purpose of
sale.
Brokers: A broker is an agent who has
an authority to negotiate the sale or purchase of goods on behalf of his
principal, with a third person.
an authority to negotiate the sale or purchase of goods on behalf of his
principal, with a third person.
Del Credere Agent: An agent who works
after the contract till the execution of contract and gets extra commission for
the efforts put by him this commission is known as Del credere commission and
the agent is called as Del credere agent.
after the contract till the execution of contract and gets extra commission for
the efforts put by him this commission is known as Del credere commission and
the agent is called as Del credere agent.
Principal’s liability for the acts of the
agent:
agent:
The principal is
liable for all acts of the agent done within the scope of his actual and apparent
authority. The principal is even liable for the misrepresentation made or fraud
committed by the agent acting within the scope of his actual or apparent
authority during the course of the agency business.
liable for all acts of the agent done within the scope of his actual and apparent
authority. The principal is even liable for the misrepresentation made or fraud
committed by the agent acting within the scope of his actual or apparent
authority during the course of the agency business.
Note: The only condition to make the
principal liable is that, the act in question must be done within the course of
the agency business and it does not matter whether the agent has done the act
for his personal benefit/benefit of the principal or with the authority of the
principal.
principal liable is that, the act in question must be done within the course of
the agency business and it does not matter whether the agent has done the act
for his personal benefit/benefit of the principal or with the authority of the
principal.
The Agent may
expressly or impliedly be authorized to do an act on behalf of the principal.
expressly or impliedly be authorized to do an act on behalf of the principal.
Example: A authorizes his agent B to
sell car to third person and he does so, A become bound for the sale of the car
in the same manner as if A himself contracted to sell his car to third person.
sell car to third person and he does so, A become bound for the sale of the car
in the same manner as if A himself contracted to sell his car to third person.
Note: An agent act as link between his
principal and the third person.
principal and the third person.
Case law: Delhi electric supply undertaking
(DESU) v. Basanti Devi
(DESU) v. Basanti Devi
Under an
agreement between the DESU and LIC under which the employer,i.e. DESU was to
deduct insurance premium every month from the salary of its employee under
salary saving scheme of the L.I.C and the same was to transmitted to the L.I.C
it means that the employer had ostensible authority from the L.I.C to collect
premium from its employees on behalf of L.I.C
agreement between the DESU and LIC under which the employer,i.e. DESU was to
deduct insurance premium every month from the salary of its employee under
salary saving scheme of the L.I.C and the same was to transmitted to the L.I.C
it means that the employer had ostensible authority from the L.I.C to collect
premium from its employees on behalf of L.I.C
Court held that
the employer, in such a case was an agent of the L.I.C for collecting premium
from its employees, under section 182, though the employer will not be an
insurance agent under the insurance act. In this case employer was held liable
to pay the amount equivalent to the policy of the employee to the legal
representative.
the employer, in such a case was an agent of the L.I.C for collecting premium
from its employees, under section 182, though the employer will not be an
insurance agent under the insurance act. In this case employer was held liable
to pay the amount equivalent to the policy of the employee to the legal
representative.
PRACTICE EXERCISE
1. An agent has been defined
under which Sec. of The Indian Contract Act?
under which Sec. of The Indian Contract Act?
A. 148
B. 184
C. 174
D. 182
Ans: D
2. __________ is a person
employed to do any act for another or represent another in dealings with third
persons.
employed to do any act for another or represent another in dealings with third
persons.
A. Bailor
B. Agent
C. Partner
D. None of the above
Ans: B
3. The person being represented is called the
A. Promisee
B. Principal
C. Bailee
D. None of the above
Ans: B
4. A person employed by and acting under the control of the original
agent in the business of the agency
agent in the business of the agency
A. Principal
B. Substitute agent
C. Sub agent
D. None of the above
Ans: C
5. Stock brokers appoint clerks
to transact business on behalf of their clients. This is the example of a
to transact business on behalf of their clients. This is the example of a
A. Principal
B. Substitute agent
C. Sub agent
D. None of the above
Ans: C
6. A directs B, his solicitor, to sell his estate by auction and to
employ auctioneer for this purpose. B names C, an auctioneer, to conduct sale.
Is C a sub agent?
employ auctioneer for this purpose. B names C, an auctioneer, to conduct sale.
Is C a sub agent?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: B
7. The principal may ask the
agent to name another person to act for the principal in carrying out a part of
the business of agency. This person is known as
agent to name another person to act for the principal in carrying out a part of
the business of agency. This person is known as
A. Principal
B. Substitute agent
C. Sub agent
D. None of the above
Ans: B
8. A sub-agent is the agent of
the agent, whereas a substituted agent is an agent of the
the agent, whereas a substituted agent is an agent of the
A. Principal
B. Bailor
C. Sub agent
D. None of the above
Ans: A
9. Which of the following are salient features of an agency?
A. “He, who does through another, does by himself”.
B. The Principal should be
competent to contract.
competent to contract.
C. The agent may not be competent to contract
D. All of the above
Ans: D
10. A principal instructed his
agent to lodge his goods in a particular warehouse. The agent however deviated
from the instructions. The agent put the goods in another warehouse, where the
goods perished due to fire. Will the agent be held liable?
agent to lodge his goods in a particular warehouse. The agent however deviated
from the instructions. The agent put the goods in another warehouse, where the
goods perished due to fire. Will the agent be held liable?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
11. A, an agent for the sale of goods, having authority to sell goods on
credit, sells to B on credit, without making the proper and usual enquiries as
to the solvency of B. B, at the time of the sale, is insolvent. Will A be held
liable in this situation?
credit, sells to B on credit, without making the proper and usual enquiries as
to the solvency of B. B, at the time of the sale, is insolvent. Will A be held
liable in this situation?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
12. Maya asks her agent to buy a certain house for her. The agent tells
her that the house has already been bought and the agent buys the house for
herself. Will the agent be liable?
her that the house has already been bought and the agent buys the house for
herself. Will the agent be liable?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
13. Akash asks Sonu to sell his car. Sonu does so. Will Akash be bound
by this contract?
by this contract?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
14. Which of the following are the duties of an agent?
A. An agent is duty bound to follow principal’s direction or customs
B. Duty to render proper accounts
C. Duty to show proper skill and care
D. All of the above
Ans: D
15. Delegates non potest delegare
A. An agent should not deal on his own account
B. Duty to communicate with Principal
C. A Delegate cannot further delegate
D. None of the above
Ans: C
