Contract of Agency

This article has been written by Niti Shah studying BLS/LLB from Pravin Gandhi College of Law, University of Mumbai.

INTRODUCTION

An “agent” is the one who has been employed to do any act for another person or to represent another person while dealing with a third person. The person for whom such an act is done is called the “principal”. Any person can be employed as an agent who is of the age of majority, according to the law which is subjected to him, and who is of sound mind. The authority of an agent could also be expressed or implied. Contract of an Agency is based on one fact that one person cannot perform all the tasks assigned to him and so he can appoint another person to perform or act on his behalf.

General Rules of Agency

Delegation of Authority
Contractual capacity
An agent can appoint sub-agent with permission of Principal
If the agent has been removed, subagent is automatically terminated

Distinction between Agent and Servant

An agent is a person who represents another person in a matter relating to contracts, but a servant is a person employed by someone to do work of representing the employer.
An agent is bound by lawful instructions of the principal but is not under the direct control or
supervision whereas servant acts under direct control and supervision of his owner.
An agent is employed with a responsibility to bring the principal into legal relations with third parties. He represents the principal in dealing with a third party but a servant does not ordinarily do this kind of act.
Mistakes made by an agent with authority are attributed to his principal. The agent isn’t responsible for the act done but mistakes made by the servant may make his master liable only when it is committed at the time of employment.
The agent is a representative of the principal with high status. A servant may act as an agent office master with a low standard.
An agent may work for several principals at the same time. A servant usually provides
services for only one master.

Various ways in which Principal-Agent Relationship may Arise

Express Agreement

The express agreement is the kind of agreement in which the agent may be appointed by words Spoken, written, or by the conduct of the activities. E.g. power of attorney.

Implied Agreement

Implied agreements are those agreements that are unexpressed. Implied agreements arise from the circumstances of the case which include conduct and relationship of parties.it has a similar legal force than any other contract. Due to a lack of documentation, it will be very difficult to enforce an implied contract.

Agency by Estoppel

If a person represents by words or conducts that another person is his agent and the third party reasonably believes in such representation and agrees, the person who represents so is bound by the act of other this is known as the agency by estoppel. In this case of agency by estoppel, the third party must act in good faith and must rely on a representation of the agent’s authority to act as an agent.

Agency by Necessity

Agency by necessity describes a relationship during extraordinary or emergency circumstances in which an agent acts on behalf of a principal without receiving authorization from the principal. It is done to protect the principal from harm and the agent continues to act in the best interest of the principal.

Rights and Duties of Agents

1. Right to Remuneration

As per the contracts, an agent has the right to receive remuneration in the presence or absence of an agreement, remuneration for rendering the services to the principal that are not voluntary or Gratuitous. If it is provided in the contract the after the completion of work the agent has a full right to receive payment then he should receive reasonable payment from his principal.

2. Right of Lien

If the agent has not been paid lawful charges by his principal and the goods of the principal are under his control he can retain the goods until the lawful charges are paid by the principal. This right lasts till the lawful charges are completely paid off by the principal.

3. Right to be Indemnified

An agent must be indemnified for all the charges, expenses, and any liability that he incurs during the course of his employment. The indemnity should not be confused with payment both of which should be handed over separately.

Types of Agents

The agent within the limit of authority, acts on behalf of the principal and binds him or brings the principal in a contractual relationship with the third person. The principal is liable for the act of agent to the third person. An agent can be classified into different types of basis which are as follows:-

1. Specific Agent: – A specific agent is one who is appointed to perform a particular act or to represent a particular transaction. E.g., an agent appointed for the sale of a particular property.

2. General Agent: – A person hired to carry on a series of transactions relating to a particular business, he is the one who has the authority to do all acts connected with a particular, business. For example, a manager of a firm.

3. Universal Agent:- This agent is appointed to do all acts and whose authority is unlimited and can do everything which the principal lawfully.

Characteristic of Agency

The basic characteristics of the contract of agency:

Legal Binding: The crux or the main idea of the contract of agency is that the principal is legally bound by the acts performed by the agent.

Consideration is not mandatory: For consideration there is no legal requirement, to support the relationship between the principal and agent.

The capacity of principal: Legally competent to contract which means that the person should be more than 18 years of age and should be of sound mind

Authority to contract: Authority of the contract is the basic requirement of the contract. Minor can also act as an agent, though he is not having the capacity

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