Contract which creates the relationship of ‘principal’ and ‘agent’

Law of agency

A contact which creates the relationship of

‘principal’ and ‘agent’. Agent- is a person employed to do any act for

another or to represent another in dealings with third persons.

Principal- the person for whom such act is done or who is represented by the agent.

Agency – The Contract Act 1872

Whatever a person competent to contract may do by

himself, he may do so through agent, except for acts involving personal skill and qualification;

The acts of the agent are, for all legal purposes, the acts of the principal.

Section 226- ‘contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person.

General rules of Agency

Agency exists ‘whenever a person has the

authority to act on behalf of the other and to create contractual relations between the other and the third persons’

Test of Agency

Servants act under the authority of the master or

employer and has to act according to the orders of the employer. He cannot create relations between the employer and the third party

Agent is not subject to the direct control and supervision of the principal; has large discretion to act within the scope of his authority

Agent and servant

Independent contractor is one who is employed to

perform certain specified work but the manner and means of performance are entirely left to his discretion; he does not represent his employer to other person to make the employer responsible for his acts

The agent acts within the authority determined by the principal and any act done within his authority binds his principal too

Agent and independent contractor

By express agreement: generally oral or written

expression. But execution of a deed of sale or purchase of land requires a formal power of attorney on stamped paper;

By implied Agreement- where existence of agency is inferred from the circumstances of the case, or from the conduct of parties or from relationship between parties

Agency by ratification

Creation of Agency

By estoppel: when an agent does an act or

incurs any obligation on behalf of the principal and the principal by his words or behavior induces such third party to believe that such acts or obligations are within the scope of his authority, the principal becomes bound by such obligation or acts

Agency by implied agreement

Agency by holding out : in this case the

principal does some affirmative or positive act or conduct to establish agency subsequently.

Agency by necessity: Where there is a real necessity for acting on behalf of the principal; it is impossible to communicate with the principal within time available; the agent acts bonafide in the interests of the principal

Agency by implied agreement

Ratification means subsequent adoption and

acceptance of an act originally done without instructions or authority.

Section 196- where act 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

Agency by ratification

Anything done by an agent within his express or

implied authority binds the principal The principal is not responsible for an act done by

any person other than the agent under a delegated authority from the agent provided that delegation is not permitted by the principal.

Sharing of obligations between the agent and the principal

Actual authority: to do all acts which have been

assigned to him either expressly or impliedly. Ostensible or apparent authority: An agent

authorized to do some act has the authority to do every lawful thing which is necessary to do such act.

Anything done in excess of agent’s actual authority binds the principal if it is within his apparent authority, provided the third parties act bonafide.

Agent’s authority

An agent cannot lawfully delegate his

authority without express authority of the principal.

Exceptions With express or implied authority of the

principal; Unforeseen emergencies; Nature of agency makes it necessary Custom

Delegation of authority

- To follow the principal’s direction or customs- To carry out the work with reasonable skill and

diligence- To render accounts- To communicate- Not to deal on his own account- Not to make any profit out of his agency- Not to delegate authority- Not to set up adverse title- Not to use information against principal

Duties of Agent

By the act of the parties Agreement Revocation by the principal Renunciation by the agent By operation of law Completion of the business of agency Death of the either party Insanity Insolvency of the principal Destruction of the subject-matter Dissolution of company

Termination of agency

A cooperative device to spread the loss caused

by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against the risk

Def- is a contract whereby one party undertakes, in return of a consideration called premium, to pay to the other party a certain sum of money on the happening of a certain event or to indemnify the other party against a loss arising from the risk insured.

Law of insurance

The party which promises to pay a certain sum of money to, or to indemnify, the other party is called the insurer (or assurer, undertaker); and

The party to whom this protection is given in exchange of premium is called the insured (or assured; or policy holder);

The document containing the terms and conditions of the contract of insurance is called a policy

Parties

Utmost good faith Indemnity Insurable interest Causa proxima (liability is limited to the

losses which have been proximately caused by the peril insured against.)

Doctrine of subrogation (in case of fire and marine insurance)

characteristics