Chapter x (Secs.

182 to 238) of the Indian Contract Act, 1872

 Agency Generally
• Qui per alium facit per seipsum facere videtur

• He who does an act through another is deemed in law to

do it himself

• Qui facit per alium facit per se

• He who acts by another acts by himself

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 RULES OF AGENCY
There are two important rules of agency:

1.Whatever a person can do personally, he can do through

an agent.
except in case of contracts involving personal services such as
painting, marriage, singing, etc.

2.He who does an act through another does it by himself .

i.e., the acts of the agent are considered the acts of the principal
(Sec. 226)

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 DEFINITION OF AGENT AND PRINCIPAL
AGENT-Sec 182

An ‘AGENT’ is a person employed to do any act for another or to represent

another in dealings with third persons. The function of an agent is to bring
his principal into contractual relations with third persons.

PRINCIPAL
A person for whom the above act is done or who is so represented is
called
the ‘PRINCIPAL’

THE RELATIONSHIP BETWEEN THE AGENT AND THE PRINCIPAL IS

CALLED “AGENCY”

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 Test

• Representation

• Power to bind

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 P.Krishna Bhatta V. Mundila Ganapathi Bhatta

• Every person who acts for another

is not an agent.

• Difference between Agent and

Servant.
• Creation, modification or termination of contractual
obligations

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 DIFFERENCE B/W AGENT & SERVANT
An agent is employed to bring the principal into the legal relations
with the third persons or to represent him in dealings with third
persons.
A servant does not ordinarily create legal relations b/w
the third person and the employer.

An agent is bound to follow all the lawful instructions of the

principal but he is not subject to the direct control and
supervision of principal. A servant acts under the direct control
and supervision of his employer and is bound to follow all the
reasonable orders given to him in the course of his employment.

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Contnd...

An agent may work for several principals at the same time but
servant usually serves only one master.

A principal is liable for the wrongs of his agent done within the
scope of his authority. A master is liable for the wrongs of the
servants if they are committed in the course of his employment.

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 Agent and Servant
 Relationships and Authority -legal and representation

 Degree of control of supervision.

 Mode of payment of remuneration

 Discretion-hire and fire/notice of termination

 Liability for wrongful acts

 Services-Serves..

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• Managing Director-Employee of company ..
But
Position of an agent in his dealings with third
persons.
e.g. Secretary of a company, Stockbrokers,
architects etc.

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Difference between Agent
and Bailee
• Subsisting of Relation.
Agent=Bailee
Bailee=Agent.
Agent-Power to contract.
Bailee- doesnot have that power.
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Distinguishing feature of
an Agency

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 ESSENTIALS OF RELATIONSHIP OF
AGENCY
• INTENTION OF AN AGENT TO ACT ON BEHALF
OF THE PRINCIPAL,
E.g. If I authorise my agent to sell my house to a third
person and he does so, I become bound for the sale of the
horse to the third person in the same way as if I myself
contracted to sell the house to the third person.
The agent is only a connecting link between his Principal an
the third person.
Contracts , obligations and legal consequences are same as
though as acts done by the principal in person.

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 Establishing Agency
• Use of the word ‘Agent’ for a
person is not conclusive proof of
the fact that there is agency in law
between the parties.
The Court must examine:
• True nature of the Agreement.
• Subsequent dealings between the parties.

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 Loon Karan Sohan Lal V.
John & Co.
• Conferring a licence on a person by the Government of Assam to have the
exclusive right to purchase yarn and sell it to the consumers, did not make
such a person as govt’s agent even though he had been described as such in
the agreement.

• In this case, it was found that in fact, the person so authorised was solely in
his own name, and there was no indication to suggest that he was an agent,
even by implication.

• A PROCUREMENT AGENT has been held to be not an agent, as he is

only a person to do an act on a commission and not to represent another.

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 Sakthi Sugars ltd V. Union
of India
• It has been held that the State trading corporation which is a
legal entity, when permitted to export sugar, doesn’t
become the agent of U.O.I while exercising that commercial
function.

• Its position is just like that of an individual, who, when

authorised to export some goods, has the position only of a
licensee, rather than an agent of the U.O.I.

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 Chairman, Life Insurance Corpn V. Rajiv
Kumar Bhaskar

• Tripartite arrangement.

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 Features of a contract of Agency
• 1. The Principal Should be competent to contract.
Shephard V. Cartwright
Can Minor appoint an agent.
Can guardian of a minor appoint an agent.
Mahendra Pratap Singh V. Padam Kumar Devi
Client-power of attorney-when in good health-
subsequently-mental incapacity- Is Power of
attorney still valid?

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 WHO CAN EMPLOY AN
AGENT?
Acc. To sec 183 of ICA any person who is of
i. Age of majority according to law to which is a subject, and
ii. who is of sound mind
may employ an agent.

WHO MAY BE AN AGENT?

Acc to sec 184 of ICA any person who is authorized to act
such a person may be an agent. As the agent does not make
contracts on his own behalf it is not necessary that he should
have contractual capacity.

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Agency not applicable

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 Features of a contract of Agency
• 2. The agent may not be competent to contract
( Sec 183)

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 Minor as an Agent
• Ordinarily, an agent incurs no
personal liability while
contracting for his Principal and
therefore it is not necessary that he
should be competent to contract.

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 3. No consideration is necessary to create an
Agency.
• Sec 185.
• From the very nature of contract, the principal
agrees to be bound by the acts done by the agent on
his behalf and that serves as a sufficient detriment to
the principal.
• Generally an agent is remunerated by way of
commission for services rendered, but no
consideration is immediately necessary at he tie of
appointment.
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 CLASSIFICATION OF AGENTS
Classification according to extent of authority
Special Agents

General agents

Classification according to nature of work performed by them

1) Commercial or Mercantile Agent

2) Non mercantile Agents

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Mercantile Agents
• Factor
• Auctioneer
• Del Credere Agent
• Pakka and Katcha adatias
• Indentor
• Broker
• Commission Agent

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 Classification Of Agents
• ONE BROAD CLASSIFICATION OF
AGENTS
1) Mercantile Or Commercial Agents
i. Broker: A broker is a mercantile agent engaged to buy and /or sell
property or to make bargains and contract between the engager and
a third party for commission.
ii. Factor: A factor is a mercantile agent who is entrusted with the
possession of goods with an authority to sell the same.
iii. Commission Agent: A commission agent is an agent who is
employed to buy or sell goods or transact business.
iv. Del Credere Agent: A del credere agent is one who, in
consideration of an extra remuneration, called a del credere
commission, guarantees the performance of the contract by the other
party.
Cont.…
v. Auctioneer: An auctioneer is an agent appointed to sell goods by
auction.
vi. Banker: though the relationship between banker and customer is
ordinarily that of debtor or creditor, he acts as an agent when he buys
or sells securities on his behalf.
vii. Pakka and Katcha Adatias: A pakka Adatia is a person who
guarantees the performance of the contract, not only to his principal
but also to the broker to the other side.
A katcha adatia does not guarantee the performance of the contract.
Guarantees on the part of the Principal
v. Indentor: An indentor is commission agent, who,, for a commission,
procures a sale or a purchase on behalf of his principal, with a
merchant in a foreign country.
 Cont.…

2) Non-Mercantile or Non Commercial

Agents
i. Wife As The Agent
ii.Sub-Agents
General Agent
A General agent is one who is appointed
to represent the principal in all the
matters concerning a particular business

Special Agent
A Special agent is one who is appointed
to do some particular act or enter into
some particular contract

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Factor

Possession of property
Sell on credit and in his own name
General lien
Cannot Barter
Cannot Delegate

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Auctioneer
Appointed to sell by auction i.e by open
sale.
Deliver goods on receipt of price
Recover price from highest bidder
Can file suit in his own name
Particular Lien
He cannot give warranties unless expressly
authorized.
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Broker
Engage to buy or sell the property
Memorandum book- Sold and Bought note

Commission Agent
Employed to buy or sell or to Transact Business
Not Liable for third party , Particular lien
May or may not have possession

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Non Mercantile Agent
Wife as an Agent
•Living together and looking for necessaries

Husband is not Liable

Expressly forbidden credit
Not necessary
Given money
Trader is told expressly

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If they live apart:-
No fault of wife, liable to pay for her
maintenance
Or
If they live apart:-
Under no justifiable Circumstances, she is
not her Husband’s agent

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 Creation of Agency
Modes of creating contract of Agency

By express By implied
By ratification
authority authority

By
By estoppels presumption By necessity
of agency in
husband wife
relationship
Express Agency (sec186)
• A person may be appointed agent, either by word of mouth or by
writing.
• By Consent.
• Agent under Statute and Operation of Law.
• E.g In Company-original directors.
• In relation to person appointed to manage affairs of mental patient.
• Co-principals-jointly appoint an agent.

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Implied Agency (sec187)
• An agency which arises from the
conduct, situation or relationships,
usage of particular trade of parties.
• Illustrations
• Extent of Implied Authority
• Ishaq V. Madanlal-potatoes

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 Agency by Estoppel
(sec237)
 When a person has by his conduct or statements induced
others to believe that a certain person is his agent, he is
estopped from subsequently denying it.

 Ex - A tells B that he is C’s agent, this he does in the

presence of C and within his hearing. C does not object to
the statement of A is actually not his agent. Later B makes a
deal with A as agent of C. C shall be bound by this deal.
 Armadas ltd. V. Mundogas S.A- Ostensible Authority.

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 Agency by holding out (sec189) – Though part of the law of
estoppel, some affirmative conduct by the principal is
necessary in creation of agency by holding out.

 Ex - A child purchase goods from a shop and desires the

shopkeeper to collect payment from his parents later. The
parents, though not bound to pay, make the payment. After a
few days, the child again makes purchases from the shop on
the credit of the parents. The parents would be bound this time
because, by making payment earlier without raising any
objection, they had held their child out as their agent for
making such purchases.
 Agency of necessity (sec189) - This arises where 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.
 Great Northern Rly. Co. v. Swaffield (1874)
A horse was consigned with the defendant company at the destination it was not taken
delivery by the owner. The company had to place the horse with a stable-keeper.
Held, company became the agent by necessity and hence the owner must
compensate him.
• Pre existing contract not necessary
• Actual emergency
• No other option
• Inability to communicate
• Act should be reasonably necessary
• Acting bonafide in the interest of the party concerned.

• Sachs v. Miklos (1948) – storage of furniture

 Agency in husband-wife
relationship
• Wife’s implied authority to bind her credit
purchases, however subject to limitations
• Co-habitation and domestic relationship
• Only for necessaries

• Not liable if reaasonble allowance made .

• Girdhari Lal V. W. Crawford.
To negative liability by proving:
• Husband not implied agent of wife.

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 RATIFICATION OF AGENCY( Sec 196-
200)
1. Essentials of a valid Ratification
 Act done on behalf of another- 2 options
a.To disown the act.
b.To ratify the same.
Ratification is thus a kind of affirmation of unauthorised acts.

1. Act done on behalf of another

Keighley, Maxsted& co .v. Durant.
Karachi wheat.

 Principal should be in existence and competent to contract.

Kelner .v. Baxter.
Promoters of the company not yet formed. Contracted on behalf of
company and once formed ratified.

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Ratification may be express or
implied.
e.g. A without authority, buys goods for B. Afterwards B,
sells them to C on his own account. B’s conduct implies a
ratification of the purchase made for him by A.

Ratification with full knowledge of

facts.
Savery V. King
No valid ratification can be made by a person whose knowledge of the
facts of the case is materially defective.

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 Ratification of the whole transaction.
A person cannot ratify a part of transaction
which is beneficial and repudiate the rest.
Ratified act should not be
injurious to a third person.
 E.g a holds a lease from B, terminable on 3 months
notice. C. an unauthorized person, gives notoce of
termination to A. The notice cannot be ratified by
B, so as to binding on A.

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Ratification within a reasonable
time.
Delay in ratification could prejudice the interest of
the third person.

• Effect of Ratification- The doctrine

of relation back.
As if the act had been performed with
the principal’s prior authority.

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 Relations of Principal and
Agent
• Duties of Agent.
Mutual rights and duties may be wholly
provided in their contract. Following
are general duties, unless modified or
excluded by special contract.

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 Duty to execute mandate
To carry out the work undertaken according to the directions
given by the principal.
• Any failure in this respect would make the agent absolutely liable for the
principal’s loss
• Pannalal Jankidas v. Mohanlal
Commission agent-purchased goods for his principal and stored them in a
godown pending their dispatch. The agent was under instruction to insure
them. Charged for premium but failed to insure.
The goods were lost in an explosion in the Bombay harbour.
Is Agent liable?
Bombay Explosion ( compensation) ordinance.

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 Duty to follow instructions or in its absence customs
( Sec 211)

• When the agent doesn’t act as stated above, if

any loss in sustained, he must make it good to
his principal, and if any profit accrues, he
must account for it.
• Illustration:
• Agent-money in hand-investment banker.
• Below reserved price.
• Lilley V. Doubleday-own repository-different warehouse.
Breach of duty.
Shankarlal Agarwalla V. S.B.I-Demonetisation-Income tax
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 Duty of reasonable care
and skill
• To conduct the business of the agency with skill required
in similar business.
• Compensation-direct consequences of own neglect-want
of skill or misconduct but not for loss which is indirectly
or remotely caused.
Keppel V. Wheeler.
Principal-instructed estate agent-to find buyer-Ist offer for
pounds 6150 and before the sale – 2nd offer pounds 6750-
Agent did not communicate about 2nd offer.
Is he liable for loss? Standard of care and skill.

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 Duty to communicate (S. 214)
• It is the duty of an agent in case of
difficulty to use all reasonable
diligence and seeking to obtain his
instructions.
• Jayabharathi corpn V.SVPN Rajesekara Nadar
• Agent-purchases affected-dispatch soon after transport
strike-but not done anything in the matter.
• Neglect and misconduct.

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 Duty to avoid conflict of interest or duty
not to deal on his own account.
If in any transaction, an agent deals on his own account without the
Principal’s prior consent, the principal has the following two rights:
(i) To repudiate the transaction by showing either
a. That any material fact has been dishonestly concealed from him by the
agent.
b. To claim from the agent any benefit which resulted from the
transaction.

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Duty to avoid conflict of interest or duty not to deal on his
own account.

• Illustrations
• Turnbull V. Garden-discount-full
price
• Bentley V.Craven.-Partner-Sugar
refineries.
• De Bussche V.Alt
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 Duty not to make secret
profit.
• Andrews V. Ramsay and Co.
Auctioneer-in addition-received
commission

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 Duty to remit sums
• The agent is however, entitled to
deduct his lawful charges.

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 Duty to render proper
•
accounts
He should not misutilize and misappropriate them.
• There is no provision enabling an agent to require the principal
to render accounts or filing a suit for that purpose.
Narandas V. Papammal
• Although there is no statutory right, there is equitable right
under special circumstances.
• A. To determine claim.
• B. remuneration on the extent of dealings.

Saraj Kapur V. Nitin casting ltd.-5% commission on orders

received-to be paid after the orders were executed.
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 Delegation

• Delegatus non potest delegare.

• A delegate can not further delegate

• Sub agents
56
 Duty not to delegate-
Exceptions.
• Nature of Agency
• Trade Custom
• Ministerial action
• Principal’s consent.

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 Sub Agents
• S. 191 Sub agent defined

• S. 194 Substituted agent defined

• Relationship
• Principal-Agent-Sub Agent 58
Sub Agent

59
 Sub Agent Properly appointed

• Whether represents principal?

• Section 192
• Privity of contract between P and A, A and
SA
• Agent’s responsibility
• Sub agent’s responsibility
• Torts-Fraud & Wilful wrong. 60
 Sub Agent Improperly appointed

• S. 193
• Representation
• Relation between agent and sub
agent-P and A.
• Liability of agent
61
 Substituted Agent
• Privity of contract between P and
subs agent.
• Agent of Principal.

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Sub Agent and Substituted
Agent.
• Common-Appointment made by
Agent.
• Appointment
• Responsibility

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Remedies of Principal for
breach of duty.
• To ask for rendition of accounts.
• Damages for want of skill and care.
• To resist claim for commission and
indemnity.
• To obtain an account of secret
profits and recover them

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Rights of an Agent
 Right to remuneration(Sec 219-220)

• Right to remuneration(Sec 219-220) :- An agent is entitled to his agreed

commission or remuneration and if there is no agreement, to a reasonable
remuneration.
• However, an agent who is guilty of misconduct in the business of agency is not
entitled to any remuneration in respect of that part of the business which he has
misconducted.

Sellers V. London Countris Newspapers

Agent appointed to secure orders for advertisement.

Saraswati Devi V. Motilal

Agent-to find a purchaser for sale of property.

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• The Agent’s efforts should be effective cause for the transaction. The
bargain must be direct result of his service.
Green V.Bartlett
The auction failed to find a purchaser.

Vasanji Moolji V. Karsondas Tejpal

The plaintiff, a broker, to obtain a loan.
Where the agent’s services are only remotely connected with the
transaction, his remuneration is not earned.

Tribe V.Taylor
Agent-introduced for loan-subsequently entered into partnership.

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 Right of Retainer(Sec
217)
• This is also known as agent’s right of retainer. It
can only be claimed on money received by him in
the business of the agency. He can not therefore,
retain, sums received by him in one business for
his commission or remuneration in other business
on behalf of the same principle.

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 Right of Lien(Sec 221)
• In the absence of any contract to the contrary,
an agent is entitled to retain goods, papers, and
other property, whether movable or immovable
of the principal received by him until the amount
due to himself for commission,
disbursement, and services in respect of the same
has been paid or accounted for to him.

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 Conditions
• The agent’s possession must be lawful.
• The agent has only a particular lien.
• The same is los, when the goods are lost or when
agent waives his right.

• Effect of Lien-This right is limited in nature, but this

confers no authority on the agent to sell or dispose
of the property without the consent of the owner.

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Right to Indemnity

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4- 72
 Example :- B, at Singapore, under instruction from A of Calcutta,
contracts with C to deliver certain goods to him. A does not send the
goods to B, and C sues B for breach of contract. B informs A of the
suit, and A authorizes him to defend the suit. B defends the suit, and
is compelled to pay damages and costs, and incurs expenses. A is
liable to B for such damages, costs and expenses.
Adamson V. Jarvis
Auctioneer-sold goods-had no right to sell.
According to Sec 224 an agent can not claim
indemnification for a criminal act, even though the
principal had agreed to do so.

Example :- A employs B to beat C, and agrees to indemnify him

against all consequences of that act. B thereupon beats C and has pay
damages to C for so doing. A is not liable to indemnify B for those
damages.
Right to Compensation for injury caused
by principal’s neglect (Sec 225)
 :- The principal must make compensation to his
agent in respect of injury caused to such agent by
the principal’s neglect or want of skill.
Example :- A employs B as a bricklayer in
building a house, and puts up the scaffolding
himself. The scaffolding is unskillfully put up,
and B is in consequence hurt. A must pay
compensation to B.

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 Right of stoppage-in-transit :- This right is available to agent in
the following two cases:-
i. Where he has purchased goods with his own funds or by incurring
personal liability. Like an unpaid seller, he enjoys the right of
stopping the goods in transit if in the meantime the principal has
become insolvent.

i. Where he holds himself liable for the price of goods sold for
example, del credere agent, he may exercise the unpaid seller’s right
of stopping the goods in transit in case at buyer's insolvency.
 • Relations of
Principal and Agent
with Third Persons

4- 77 Zxkl;’
• Liability of the Principal
• Authorized and unauthorized acts.

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Personal Liability of Agent
(Sec 230)
• Presumption
• 1. Foreign Principal
• 2.Principal Unnamed
• 3.Non-existent or incompetent Principal.
• 4. Liability of Pretended Agent
• 5. Breach of warranty of Authority.

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Termination of Agency

80
Termination of Agency

81
 TERMINATION OF AGENCY

1. By act of the parties

 Revocation by the principal

Revocation may be express or implied.

No revocation of Agency when agent has interest in the
subject matter.
Revocation possible before the authority has been exercised or
partly exercised.
Principal to compensate if there is premature revocation
without justification.
Reasonable notice.
Termination of agency terminates sub agency also.
Time from which the termination of agent’s authority
becomes effective.

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 TERMINATION OF AGENCY CON’T
2. By operation of law
 Performance of the contract-completion of the business.

 Expiry of the time

 Death of either party or Insanity of either party

 Insolvency of either party

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Termination of Agency

84
 Termination of Agency
• Particular
• Completion of business
• Expiry of time
• Death of P or A – knowledge?
• Insanity of P or A – knowledge
• Insolvency of P (S. 201) 85
 Termination of Agency
• General
• Destruction of subject matter
• P an alien enemy
• Dissolution of company
• Agency unlawful
• Impossibility of performance
• Irrevocable authority (sec. 202) 86