Business law concept contract of agency-MBA Material
Modern business is become a complex day by day. As such it
is not possible for a person to carry on all business transaction himself. He
has to delegate some of his duties and powers to another person.
The person
who acts on behalf of another or who has been delegated an authorities is
called an agent. The person who authorizes another to act is called a principal
and agent is called an agency. The law of agency is based on the principle
“want a person day by another, he does by himself”.
Section 182
of a Indian contract act defines an agent is a person employed to do any act
for another or to represented is called the principal. The function of the
agent is to bring his principal into contractual relationship with third
person. The agent is a connecting link between the principal and the third
party.
Ex: if your father asks you to deposit money in the bank,
your father as a principal and you acts as a agents.
What is Agency:
Agency is
the relationship which exists between an agent and his principal to bring the
principal in to legal relationship with a third party. The relationship between
the agent and the principle is called agency.
Nature / essential of agency:
1. Agreement between the principal and
the agent
2. Intention of the agent to act on
behalf of the principal
3. Competency of principal
4. Consideration is not necessary
5. Authority of principal
Creation of agency:
The
relationship between principal & agent (agency)may be created by
1. By express agreement
2. By implied agreement
3. By ratification
4. By operation of law
By express agreement By express agreement:
A contract
of agency may be created by an express agreement. The agreement may be mode
orally or in writing. In fact in a large number of business dealings agencies
are created by a letter document or deed in writing. The usual form of a
written contract of agency is known as “power of attorney”. The power of
attorney gives the agent to act as an agent on the behalf of the principle in
the accordance with the terms and conditions mention in the contract.
By implied agreement:
A contract
of agency may be created by implied agreement, it may be implied under certain
circumstances from the conduct of the parties, situation, relationship of the
parties.
Ex: partners, servants, wife these are the examples for
implied agencies which arises from the relationship, situation, conduct both the
parties.
By ratification (confirmation):
An agent
may act on the behalf of the principal either with or without his authority.
Acts performed by an agent beyond the scope of his authority are not binding
upon the principal. In such a case the principal may either adopt or reject the
act of the agent. If the act is rejected their is no agency and the person
acting as an agent is personally liable. In case the principal adopt the act of
the agent done without his authority he is said to have ratified that act.
Classification of agents or kinds of agent:
Agent
Classification on the basis of classification on the
basis o
Authority nature of
work performed by the agent
Authority factor
specific agent auctioneer
general agent broker
universal agent commission
agent
banker
Specific agent:
A
special agent is one who is appointed to perform a particular act of to
represent his principle in some particular transaction.
Ex: a agent employed to sell a
house.
A
agent employed to bid to an auction such an agent an limited authority and as
soon as the act is performed, his authority comes to an end he cannot bind his
principle in any matter other than for which he is employed.
General agent:
A
general agent is one who has authority to do all acts connected with a
particular trade or business of employment for examples the manager of the
company the principle of an educational institution.
He
is a general agent of an firm/organisation who has implied authority to bind
his principle by doing any thing necessary for carrying on the business such
authority of an agent is continues until the organisation is put it an end.
Universal agent:
An
universal agent is one whose authority to act for the principle is unlimited.
He has authority to bind his principle by any act which he does provided that
act is legal agreeably by the law.
Factor:
A
factor is and mercantile agent entrusted with the possession of goods for the
purpose of selling them. With the consent of the owner any sale disposition of
them made by him.
Auctioneer:
An
auctioneer his an agent appointed by a seller to sell his goods by public
auction. It is for a reward which is generally in the firm of commission he is
primarily the agent of the seller after the sale has taken place he becomes the
agent of purchaser also.
Broker:
A
broker is an agent who is employed to buy or to sell goods on behalf one
another he is employed primiarly to bring about a contractual relationship
between the principal and the third party. He has no possession of the goods,
he has no right of lien.
Commission agent:
He
is employed to buy land & sell goods or transact the business for other
persons for which he receives commission in the form of money for his labour
and trouble.
Banker:
The
relationship between a banker and customer is that of debtor and creditor there
is an obligation of the party of the banker to pay D.D cheque of the customer
here the customer is principle and the banker is his agent.
Duties of an agent:
1. To
carry out the work under taken according to the directions given by the
principal.
2. To
carry out the work with reasonable care skill, diligence.
3. To
rendered proper accounts to the principal.
4. To
communicate with the principal in case of difficulty
5. Not
to deal on his own account
6. To
pay sums receives for the principal in the principal account
7. To
protect and preserve the interest of the principal in case of death or
insolvency.
8. Not
to use information obtained in the course of agency against the principal.
9. Not
to make any secret profit from agency.
10. Not
to setup an adverse title(title means procession)
11. Not
to delegate his authority(not appoint the sub agents)
Rights of an agent:
1. Right
of retainment
2. Right
to receive remuneration
3. Right
of lien
4. Right
of indemnification
5. Right
of compensation
Right of retainment:- opposite of return
Retain
means (keep possession of) the agent may retain some money which is due to
himself in respect of his remuneration, advances, expenses which are incurred
by him in conducting the business.
Right to receive remuneration:
The
agent is entitled to get his remuneration according to the contract.
Right of lien:
Lien
means the right to hold others property until the debt is paid.
The agent is entitled to retain
goods, papers movable, immovable property of the principle until the amount due
to himself.
Right of indemnification:
Indemnification
means compensation for damage or losses the agent will be indemnified against
to the consequences of all the lawful done by him by the principle.
Right of compensation:
The
agent has a right to be compensate for injures sustained by him by neglect on
the part of the principal.
Duties and rights of principal:
Duties of principal:
The
duties of a principal towards the agents are
The rights of the agent against the
principal
The principal owns the following
duties to an agent those are
1. To
indemnify the agent against the consequences of acts done in good-faith
2. To
indemnify the agent against the consequences of all lawful acts.
3. To
indemnify the agent for injury caused by principal negligence
4. To
pay the agent the commission and other remuneration agreed in the contract of
agency.
The duties of a principal=rights
against the agent
Rights of a principal:
The
duties of an agent are the rights of the principal indirectly when an agent
fails in his duty towards the principal, the following rights (remedies)
against the agent.
1. To
recover damage
2. To
obtain an account of secret profits.
To recover damage:
If
the principal suffers only loss due to disregard by the agent by not following
the custom of trade negligence on the part of the agent, then he can recovers
damages from the agent
To obtain an account of secret
profits:
If
the agent without knowledge of the principal makes any secret profit out of
agency the principal has right to recover them from the agent.
Personal liability of the acts of
the agent:
Where the principal name and
existence are disclosed by the agent then
1. The
acts of the agent are the acts of the principal
2. When
the agent exceeds his authority to do work of the principal, the principal is
bound by that part of the work
3. Notice
given to an agent is notice given to the principal
4. Misrepresentation
or fraud of agent, the principal is liable for the misrepresentation made for
the fraud committed by the agent in the course of the business for the principal
Personal liability of the agent:
The
agent is personally liable in the following cases:
1)when the contract expressly
provides that the principal would hold the agent personally liable in case of
breach of contract the agent is personally liable.
2) when the agent act for a foreign
principal, the agent is personally liable
3)where the agent acts for an end
undisclosed principal is personally liable
4)where the agent acts for a principle
who can not be sued, incompetent to enter in to a contract, minor, idiot,
insolvent, lunatic etc..
5)where he sign a contract in his
own name
6)where he acts for a principal we
not in existence
7)where he receives pays money by
mistake of fraud
Termination of agency:
revocation a reasonable notice
Termination
of agency
By acts of the parties by
operation of law
Mutual agreement performance
the contract
Revocation by the principal becomes
impossible
Revocation by the agent expiry of
time
Death
or insanity of p/a
insolvency
principal
becoming an
alien
enemy
dissolution of a company
destruction of subject
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