1. CONTRACTS OF AGENCY

2. INTRODUCTION
In modern business it is not always possible for a person to do everything by himself. So, it becomes necessary to delegate some of the acts to be performed by another. Such another person is called an agent & the contract under which such person is appointed is called a “contract of agency. “ The law of agency is based on the principal, “what a person does by another, he does by himself.”

3. MEANING
The contract which creates the relationship of principal & the agent is known as the contract of agency. According to English law, the contract of agency implies one person appointing another person to establish lawful business relations with third parties.

4. DEFINITION
According to section 182 of the Indian contract Act, “An agent is a person employed to do any act for another or to represent another in dealings with third parties. The person for whom such act is done or who is represented, is called the principal.”

5. ESSENTIAL ELEMENTS OF AGENCY
Express Or Implied Agreement
Contractual Capacity In Principal
Consideration Not Necessary
Appointment Of Agent By The Principal

6. WHO MAY EMPLOY AN AGENT ?
According to Section 183 of the Indian Contract Act, “Any person who is of the age of majority according to law to which he is subject & who is of sound mind may employ an agent.” Thus the principal must be capable of making a contract. So, it is necessary that the principal should have competency to make a contract. If the principal is himself a minor or is of unsound mind, he cannot be made liable for the acts done by the agent.

7. WHO CAN BECOME AN AGENT ?
Since the acts done by the agent are taken as the acts done by the principal, any person may become an agent for creating relationship between the principal & the third parties. Competency to make a contract is not necessary to become an agent. According to Section 184 of the Indian Contract Act, “As between the principal & third person any person may become an agent, but no person who is not of the age of majority & of unsound mind can become an agent, so as to be responsible to his principal according to provisions.”

8. IS CONSIDERATION NECESSARY ?
One of the essentials elements of a valid contract is consideration. But, Section 185 of the Act states that, “No consideration is necessary to create an agency.” Therefore, it is not necessary that the agent should get any consideration for his services. It makes no difference on the rights & duties of the agent whether he gets some consideration or not. The only difference is that if the agent is paid any consideration, he is bound to perform the act assigned by the principal.

9. CREATION OF AGENCY By Express Agreement By Implied Authority
By Estoppel Or Holding Out
By Necessity
By Ratification

10. LEGAL POSITION OF A WIFE AS AGENT FOR HER HUSBAND
When The Husband & Wife Living Together
Case: Girdhari Lal vs. Crowford
When Wife Living Separately From Husband

11. DOCTRINE OF RATIFICATION
According to Section 196 of the Act, “where Acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.”

12. RULES GOVERNING RATIFICATION
Act Must Be Done On Behalf Of The Person Ratifying
Existence Of The Principal
Contractual Capacity
Lawful Acts
Express Or Implied Ratification
Whole Transaction
Full Knowledge
Within Reasonable Time
No Damage to Third Party

13. EFFECT OF RATIFICATION
An Agency Is Established By Ratification & The Principal Becomes Liable For The Act ratified
Invalid Acts Become Valid Acts After Ratification
The Agent Become Entitled To Receive Necessary Expenses & Commission
The Effect Of Ratification Is Retrospective

14. EXTENT OF AGENT’S AUTHORITY
Under Normal Condition
In Emergency

15. SUB - AGENT
According to Section 191, “Sub-agent is a person employed by & acting under the control of the original agent in the business of agency.” This section states that the sub-agent is appointed by the agent & acts under the control of original agent in the business of agency.

16. CONDITIONS OF APPOINTMENT OF SUB-AGENT
Where The Principal Has Clearly Authorised The Agent To Appoint Sub-Agent
Where The Ordinary Custom Of Trade Allows Employment Of Sub-Agent
Where The Nature Of Business Is Such That It Is Necessary To Appoint Sub-Agent & The Performance Become Difficult Without A Sub-Agent
Where The Principal Is Aware That His Agent Wants to Appoint Sub-Agent & Does Not Object
Where An Emergency Requires Delegation

17. LEGAL POSITION BETWEEN PRINCIPAL, AGENT & SUB-AGENT
Where Sub-Agent Is Properly Appointed
Liability Of Principal To Third Party
Liability Of Agent To Principal
Liability Of Sub-Agent To Agent
Where Sub-Agent Is Not Properly Appointed

18. SUBSTITUTED AGENT
According to Section 194, “Where an agent holding an express or implied authority to name another person to act for the principal in the business of agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.”

19. TYPES OF AGENTS General Agent Specific Agent Mercantile Agent Broker
Factor
Auctioner
Commission Agent
Banker
Del-Credere Agent

20. DUTIES OF AN AGENT TO PRINCIPAL
To Work According To Directors
To Work With Reasonable Skill & Diligence
To Render Proper Accounts
To Inform The Principal In Difficulties
Not To Deal On His Own Account
To Pay The Sum Received For The Principal
To Protect The Interest Of The Principal
Not To Delegate The Authority
Not To Use The Information Obtained In Course Of Agency Against Principal
Not To Set Up An Adverse Title

21. RIGHTS OF AN AGENT
Right Of Compensation For Premature Breach Of Agency
Right Of Retainer
Right To Receive Remuneration
Right Of Lien
Right Of Indemnification For Lawful Acts
Right Of Indemnification For Acts Done In Good Faith
Right Of Compensation For Principal’s Negligence

22. RIGHTS OF PRINCIPAL
To Get The Agency Business Conducted According To Directions
To Recover Compensation Due To Negligence
To Get Proper Accounts
To Give Instructions In Case Of Difficulty
Right To Repudiate
To Claim Secret Benefits
To Receive all Sums From The Agent For Principal
To Forfeit Remuneration In Case Of Misconduct

23. DUTIES OF PRINCIPAL To Pay Remuneration To The Agent
To Indemnify For All Lawful Acts
To Indemnify For All Acts Done In Good Faith
To Make Compensation Due To Negligence
To Compensate For Premature Breach Of Agency

24. PRINCIPAL’S LIABILITY TO THIRD PARTY
Agent Acting For Named Principal
When An Agent acts Within His Authority
When An Agent Exceeds His Authority
Effect Of Notice Given To Agent
Consequence Of Doctrine Of Estoppel
Misrepresentation Or Fraud By Agent
Agent Acting For Unnamed Principal
Agent Acting For Undisclosed Principal
Position Of Principal
Position Of Agent
Position Of Third Party

25. PRETENDED AGENT
When a person, who is not an agent, claims to be an authorised agent of the another person & thereby induces a third person to make a contract with him, such person is called a pretended agent.
Legal Position Of Pretended Agent:
To Make Compensation To Third Party
Not Entitled To Claim Performance

26. PERSONAL LIABILITY OF AGENT TO THIRD PARTY
When Acting for Foreign Principal
When Acting For An Undisclosed Principal
When For The Principal Who Cannot Be Sued
When The Agent Exceeds His Authority
By Express Agreement
Agency Coupled With Interest
Non-Existence Of The Principal
When The Agent Signs The Contract In His Own Name
When Custom Or Trade Usage
Misrepresentation Or Fraud

27. TERMINATION OF AGENCY Termination By The Act Of Parties
By Mutual Agreement
Revocation By The Principal
Agency Coupled With Personal Interest Of Agent
Partial Use Of Authority By The Agent
Personal Liability Undertaken By The Agent
Renunciation By The Agent
Compensation For Revocation
Notice Of Revocation
Revocation Express Or Implied

28. CONTD. Termination Of Agency By Operation Of Law
Completion Of The Agency Business
On Expiry Of Fixed Period
By Death Or Insanity Of The Principal/Agent
Insolvency Of Principal
Destruction Of The Subject Matter Of Agency
Principal Becoming An Alien Enemy
Winding Up Of A Company

29. THANKS