Agent – Law of Contract

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agent

Who is an agent?
A person who has been employed to discharge a duty for someone else or to represent him, is called an “Agent.”

The represented person, or for whom the work is being done, is called the “Principal.”

Who can employ an agent?

  1. A person who has attained the age of Majority.
  2. A person who is of sound mind.

A person meeting with these two criteria is legally allowed to employ an agent.

 Who can become an agent?
Any person can become an agent who has:

  1. Attained the age of majority as per the law to which he/she is subject.
  2. A sound mind so that he is responsible to the Principal.

What is an agent’s authority?

  • The authority exercised by the agent can either be expressed or implied.

Illustration 1: A appoints B as his agent and tells him to go to the bank and deposit A’s money. This is an ‘Expressed’ authority from A to B.

Illustration 3: A owns a shop in Kolkata but resides in Delhi. A has hired B to manage the shop. B buys goods in the name of A for A’s shop. This is ‘Implied’ authority from A to B.[7]

  • An agent has the authority to do whatever is needed for the fulfilment of his duties towards the Principal while staying in the legal ambit. Any action of his must not be illegal during discharge of his duties.[8]

Illustration 4: A has employed B in his shop. A asks B to buy some things for the shop. B should use only legal means to obtain those things. B cannot steal or do something which is illegal.[9]

  • When faced with an emergency situation, an agent has the full authority to do whatever is necessary to protect the interests of his Principal. In an emergency an Agent would act as a prudent man and react in the way as he would have done if he himself would have been in the same situation.[10]

Illustration 5: A has employed B in his vegetable shop which is in Delhi. A asks B to take the vegetables to Kolkata to sell them. On his way to Kolkata, B finds that the vegetable may rot after two days. B has the authority to sell them in Lucknow to protect the interest of profits to be earned by A.

  • An Agent does not have the authority to employ another ‘Agent’ to do his acts. An Agent has personally undertaken the responsibility to discharge the duties delegated to him. He cannot further delegate the function.

Exception: If under ordinary circumstances and the custom of the trade in which the Agent is involved requires the presence of a ‘Sub – Agent’ (discussed later in the Article). Then, and only then, in the presence of such an exception, can an Agent engage a ‘Sub – Agent.’

What is an Agent’s Duty towards the Principal?
There are various duties of an Agent towards his Principal:

  1. He must follow the directions of the Principal.
  2. Requirement of skill and diligence.
  3. Maintain the accounts.
  4. Communicate with the Principal in order to receive instructions.

There are many other duties and rights which are thoroughly discussed in Sections 211 – 221 of the Indian Contracts Act, 1872.

What is the Principal’s Duty towards an Agent?
Likewise, the Principal also has some duties towards his Agent:

  1. Indemnification of loss incurred whilst the discharge of a lawful act.

How can an agent be discharged from his duties?
The Agent can be discharged or terminated from his duties in various ways:

  1. When the Principal revokes the Agent’s authority.
  2. When the Agent, himself, leaves the agency,
  3. When the business is complete.
  4. If the Principal dies.
  5. If the Agent dies.
  6. If the Principal becomes of unsound mind.
  7. If the Agent becomes of unsound mind.
  8. If the Principal be declared an insolvent.

Who is a ‘Sub-Agent?’
A person employed by the Agent is called a ‘Sub-Agent.’ He acts under the control of the Agent.

What is the relationship between a sub-agent and the principal?
The Principal is responsible for all the acts of frauds and willful wrongs of the Sub – Agent who has been properly employed by the Agent. The Agent is responsible to the Principal for all the acts of the Sub – Agent.

 Termination of Sub-agent’s duties.
The termination of the Agent causes the termination of the services rendered by the Sub – Agent(s), if there be any.

What is ratification?
When acts are done by a person for someone else, a third party, without their knowledge or authority; it is their right to either ratify or nullify such acts. If they ratify then the act will be deemed to be have been performed under their authority.

Ratification can be either implied or expressed.

Illustration 1: A has bought some goods for B, without B’s knowledge. He gives them to B. B later on sells them to C. Here, B has impliedly ratified the purchase made by A, on B’s behalf.

References 

[1]Indian Contracts Act, 1872. Section 182.

[3]Indian Contracts Act, 1872. Section 183.

[4] Indian Contracts Act, 1872. Section 184.

[5]Indian Contracts Act, 1872. Section 186.

[6]Indian Contracts Act, 1872. Section 187.

[8]Indian Contracts Act, 1872. Section 188.

[10]Indian Contracts Act, 1872. Section 189.

[11] Indian Contracts Act, 1872. Section 190.

[13] Indian Contracts Act, 1872. Section 211.

[14] Indian Contracts Act, 1872. Section 212.

[15] Indian Contracts Act, 1872. Section 213.

[16] Indian Contracts Act, 1872. Section 214.

[17] Indian Contracts Act, 1872. Sections 222 – 225.

[18]Indian Contracts Act, 1872. Sections 201 – 209.

[19]Indian Contracts Act, 1872. Section 191.

[20]Indian Contracts Act, 1872. Sections 192 – 195.

[21]Indian Contracts Act, 1872. Section 210.

[22]Indian Contracts Act, 1872. Section 196.

[23]Indian Contracts Act, 1872. Sections 197 – 200.