Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

AGENCY

DEFINITION (Sec 182)

• “An agent is a person employed to do any act for
another or to represent another in dealings with
third persons
...
”
• The contract which creates the relationship of
‘principal’ and ‘agent’ is called ‘agency
...


General Rules for Agency
• Whatever a person competent to contract may do by
himself, he may do through an agent, except for acts
involving personal skill and qualifications
...
For example, a person cannot marry through an
agent, cannot paint a picture through his agent etc
...
In other words the acts of agent
are, for all legal purposes, the act of the principal and are
enforceable by and against him(Principal)
...

• Only existence of close relationship, like advising
in matters of business, or rendering personal
service to his master, or working in his factory, do
not constitute agency because in these cases he
is not authorized to deal with third persons
...

• A minor, lunatic or drunken person cannot
employ an agent
...

• The reason being since the act of agent is
considered as the act of principal hence he may
appoint any person as his agent
...


KINDS OF AGENTS
(AUTHORITY POINT OF VIEW)
• General Agent:
– One who is employed to do all acts connected to the
business, e
...
a manager of a firm
...
e
...


• Special Agent:
– A special agent is one who is employed to do some
particular act or represent his principal in some
particular transaction, e
...
an agent employed to sell
a motor car
...

– If a special agent does anything outside his authority,
the principal is not bound by it, and the third parties
are not entitled to assume that the agent has
unlimited powers
...


• Universal Agent:
– A universal agent is said to be one whose
authority is UNLIMITED i
...
who is authorized to
do all the acts which the principal can lawfully do
and can delegate
...


KINDS OF AGENTS
(NATURE OF WORK POINT OF VIEW)
• Mercantile Agent:

– A mercantile agent is one who has authority either to
sell goods or to raise money on the security of goods
– The various kinds of mercantile agents are as under:
• Factor:

– He is entrusted for sale of goods
...

– He sells goods in his own name upon such terms and conditions as
he thinks fit
...


• Commission Agents:

– He buys and sells goods for his principal on the best possible terms
in his own name
...

– He may have possession of goods or not
...

– This entails that if the buyer does not pay, he(Agent) will pay
...

– He is not entrusted with the possession of goods
...

– He makes contracts in the name of his principal
...


WAYS TO CREATE AGENCY
• 1
...

– The agent may be appointed by word of mouth or by
an agreement in writing
...


• 2
...

– Something which is obvious and understood
...
” (Sec 237) ----

• (b) Agency by Holding Out:
– In this case also the alleged principal is bound by the acts of the
supposed agent, if he has induced the third person to believe
that they are done with authority
...

– However in case of agent of held out nature he has only a
limited authority to do acts, the principal is not bound by the act
outside the authority
...
Such an agency is called an ‘agency of
necessity
...
---• Where the carrier of goods acting as a bailee, does anything
to protect or preserve the goods, in an emergency
...
----

• 3
...

– Thus where a principal affirms or adopts the
unauthorized act of his agent, he is said to have
ratified the act and there comes into existence an
agency by ratification retrospectively
...
----

Essentials of a Valid Ratification
• The agent must purport to act as agent for principal who is in
contemplation:
– The agent must expressly contract as an agent for a principal in
the knowledge of third parties
...

– The word ‘identifiable’ here means that there must be such a
description of principal as shall amount to reasonable
designation of him like “on behalf of the Vice-Chancellor,
Lucknow University” , “on behalf of my elder brother”
...


• There should be an act capable of ratification:
– The act to be ratified must be lawful one
...

• The principal must be in existence:
– For a valid ratification it is essential that the principal must be in
existence at the time when the original contract is made, because
rights and obligations cannot attach to non-existent person
...

– Thus a person cannot ratify a contract made on his behalf during his
minority
...

• Whole transaction must be ratified:
– Once a part is accepted, it implies acceptance of whole
...


• Within reasonable time:
– A ratification to be effective must be made within
reasonable time after the original contract is made
...

• Ratification must not injure the third person:
– A ratification cannot be effective where its effect is to
subject a third person to damages, or terminate any
right or interest of a third person
...
Actual Authority:

– An agent can do all such acts as have been assigned to him either
expressly or impliedly and thereby bind the principal to third parties
by acts done within the scope of ‘actual’ or ‘real’ authority
...
Apparent Authority:
– An agent can also bind the principal to third parties by acts done with
in his apparent authority, though it is not in his actual authority,
provided the third party acts bonafide
...
Authority in Emergency:
– An agent has authority in emergency, to do all
such acts for the purpose of protecting his
principal from loss as would be done by a person
of ordinary prudence in his own case, under
similar circumstances
...

– If agent acts otherwise and any loss be sustained, he
must make it good to the principal, and if any profit
accrues he must account for it
...

– If the agent makes the departure he does it at its own risk
and must make good any loss so sustained by the
principal
...
Further, the agent must act with
reasonable diligence and to best of his skills else he
must compensate the principal for loss incurred
...


• Duty to Communicate: (Sec 214)
– It is the duty of an agent, in cases of difficulty, to use all
reasonable diligence in communicating with his
principal, and in seeking to obtain his instructions,
before taking any steps in facing the difficulty or
emergency
...
e
...
----

• Duty not to make any Profit out of his Agency except his
Remuneration: (Sec 217, 218)
– An agent stands in a fiduciary relation to his principal
and therefore he must not make any profit (secret
profit) out of his agency
...

– He can however deduct all moneys due to himself in
respect of his remuneration or/and expenses properly
incurred
...


• Duty on Termination of Agency by Principal’s Death or
Insanity: (Sec 209)
– When an agency is terminated by the principal’s dying
or becoming of unsound mind, the agent must take,
on behalf of the representatives of his late principal,
all reasonable steps for the protection and
preservation of interests entrusted to him
...


RIGHTS OF AN AGENT
Right to receive Remuneration(Sec 219, 220)––
Right of Retainer (Sec 218)
Right of Lien (Sec 221)
Right to be Indemnified against consequences
of Lawful Acts (Sec 222 ) but not for Criminal
and Unlawful Acts –––
• Rights to be Indemnified (repay) against
Consequences of Acts done in Good Faith (sec
223) –––
• Right to Compensation (Sec 225)–––
•
•
•
•

PRINCIPAL’S LIABILITY FOR ACTS OF
AGENT
•
•

•
•
•

when the agent acts within the scope of actual and apparent
authority (Sec 189)
When agent exceeds his actual as well as apparent authority:
– Where the excess is separable from authorized portion
(Sec 227) ––––
– Where the excess is NOT separable from authorized
portion (Sec 228)
Liability for agent’s misrepresentation or fraud (Sec 238)
Notice given to agent as notice to principal (Sec 229)
Liability based on doctrine of estoppel (Sec 237)

Liability of Unnamed Principal
• Unnamed principal means whose existence is disclose
but the name is not disclosed
...

• However in case agent declines the identity of the
principal, he becomes personally liable on the contract
...
”
• In such a case neither the existence nor the name of
principal is disclosed and the agent gives an
impression to the third party as he himself is the
contracting party although the agent has authority in
fact and is contracting on behalf of another
...
The agent may be sued on the
contract and he has the right to sue the third party, if the
undisclosed principal remains undisclosed
...
–––
– If the principal discloses himself before the contract is
completed, the third party may refuse to fulfill the contract , if
he can show that if he had known who was the principal in the
contract or if he had known the agent was not the principal, he
would not have entered the contract
...
(provided his alleged
employer does not ratify his act)
...

• Though the pretended agent is liable to make compensation
to the other contracting party, but he has no right to proceed
against that party for performance of the contract
...

• However in following cases agent is personally liable for his
conduct:
Where the agent expressly agrees
Where the agent acts for a foreign principal
Where the agent acts for an unnamed principal
Where the agent acts for an undisclosed principal
Where the agent acts for the principal who cannot be
sued
...

–
–
–
–
–

TERMINATION OF AGENCY

• 1
...
By operation of Law

• Self
– Delegation of authority
– Sub-agent
– Substituted agent
– Irrevocable(fixed) agency



---