Law of Agency

Who is an Agent and a Principal? (Sec. 182)An Agent is a person employed to do an act for another or to represent another in dealings with third persons.The person for whom such act is done, or who is so represented, is the Principal.The relationship between them is called Agency.

Who can be appointed an Agent?Any major person and of sound mind may become an agent to be responsible to the Principal.There is no bar to the appointment of a minor as an Agent but a minor, however, cannot be held personally liable.The concept of a servant may, in a sense involve an element of agency but on that account a servant is not regarded as an agent and an agent is never a servant.It is a matter of control and supervision.

Who can employ an Agent?A person who is of the age of majority and is of sound mind may employ an Agent (Section 183). No consideration is necessary to create an agency (Section 185).

Test of Agency: It is whether a person has the capacity to bind the Principal by acts done on his behalf. It is the power of an agent to make the principal answerable to third person that determines existence of agency.

Creation of Agency

Agency by agreement (Section 186 & 187).

Agency by necessity. Agency by holding out (Section 237). Agency by operation of law. Agency by ratification

Ratification is adopting or accepting subsequently a past act of an agent done on behalf of another w/o authority. It is subsequent confirmation of unauthorized acts.

Rules Governing Ratification

Act must be done by a person on behalf of another.

Act must have been done w/o knowledge or authority of the person on whose behalf the act is done.

Person must be legally in existence. May be expressed/implied by conduct

of the person. Act to be ratified must not be void ab-

initio.

Principal must be competent to ratify both at the time of contract and at time of ratification.

It must be done within a reasonable time.

It can be for whole contract and not part of it.

It should not put a third party to damages.

Classification of Agents

Specific or Particular Agent: Appointed to do a single act for the Principal. Also called a Special Agent.

General Agent: Appointed to do all acts concerning a particular trade or business of the Principal.

Mercantile Agents: Broker, Commission Agent, Factor (authority to sell to 3rd person), Auctioneer, Del-credere Agent (extra commission).

Sub-agent: An agent appointed by the original agent.

Co-agent: Two or more persons appointed as agents by the Principal to act as such jointly or severally.

Substitute Agent: Where an agent holding an express/implied authority to name another person accordingly, as part of the business of the agency as is entrusted to him. He is an agent of the Principal.

Agent’s Authority

Agent’s capacity to bind the Principal is his authority.

Agent does certain acts on behalf of the principal.

His authority extends to such acts authorized.

The authority of an agent may be express or implied (Section 186).

Revocation of Agent’s Authority

Revocation by Principal: Can at anytime before the authority has been exercised so as to bind the Principal (Section 203).

Notice must be given before revoking the authority, otherwise Agent will be entitled to damages (Section 206).

A empowers B to let A’s house. Afterwards A lets it to himself. This is revocation of B’s authority and is implied.

When Agency cannot be revoked?

Agent has exercised authority partly. Agency coupled with interest: A

gives authority to B to sell A’s land, and to pay himself, out of the proceeds (to the debt due to him from A). A cannot revoke this authority, nor can it be terminated by his insanity or death.

When Agent is personally liable.

Duties of an Agent To conduct Principal’s business. Conduct the business with skill & diligence. To render proper accounts. To pay sums received to the Principal. To communicate with Principal. On Principal’s death or insanity. Not to deal on his own account. Use of information not against Principal. No secret profit. Not to delegate. Naming another agent for principal. Liable for acts of sub-agents. Liable for misrepresentations or fraud. Liable for damages.

Agent’s Rights

Right to retain all moneys due to him. Right to claim remuneration. Right to lien. Right to indemnity. Right to be compensated. In emergency: to do such act as to protect

Principal from loss. To appoint substitute agent. To renounce agency. Compensation for premature revocation.

Principal’s Duties & Liabilities

To indemnify the agent. (i) Against consequences of lawful act, and (ii) Against consequences of the acts done in good faith.

Compensate for injury caused. To pay remuneration and dues. Misrepresentation or fraud by Agent: Is not liable

if act falls beyond Agent’s authority. Liable for contracts entered into by Agent with

third persons. Notice to the Agent is imputed notice to

Principal.

Principal’s Rights

To Repudiate contract (Section 215). To claim benefits (Section 216). To ratify or disown agent’s acts (Section

196). To revoke Agent’s authority (Section 203) To claim on loss or profit (Section 211 &

212). To demand accounts (Section 213). To refuse remuneration when agent is

guilty of misconduct (Section 220).

Termination of Agency

By act of parties: By agreement; By revocation and renunciation; By completion of performance.

By operation of law: By death or insanity; By insolvency of the principal.

Other modes of termination: By efflux of time (fixed period); By destruction of the subject-matter; By incapacity of Principal or Agent; Principal and Agent becoming alien enemy; By object of Agent becoming unlawful.