Agency Explained: Agent's Authority

Unit 9 Designed by : CA Ankita Patni Prepared by : Ranjeet Gill What is Agency? Agent means a person employed to do any...

Unit 9 Designed by : CA Ankita Patni Prepared by : Ranjeet Gill What is Agency? Agent means a person employed to do any act bu another or to represent another in dealing with the third persons and the principal means a person for whom such act is done or who is so represented. and Appointment Authority ofAgents who agent: may employ an Any person who become an agent i.e even a minor or a person ofunsound mind may become an agent and the principal shall be bound his acts. by But as a rule ofcaution, a minor or a person of unsound mind should not be appointed as an agent because he is incompetent to contract and in case ofhis misconduct negligence, the principal or shall not be able to proceed against him. consideration not necessary: - No consideration is necessary to create an agency. Creation ofAgency:- The be express implied: authority may or - 1) Express Authority: An authority is said to be express when itis given by words spoken or written. 2) Implied authority: An authority is said to be implied when it is to be inferred from the circumstances of the case, conduct ofthe parties and things spoken or written, or in the ordinary course of dealing, may be accounted from the circumstances of the case. Implied agency includes: - Agency by estoppel: An Agency by estoppel may - be created when the following essentials are fulfilled: - 1. principal must have made a representation the The representation may be express or implied. 2. 3. The representation must state that the agent has an authority to do certain act although really he has an authority. principal musthave induced the third person 4. The by such representation; and  & 5. The third person must have believed the representation and made the contract on the beliefofsuch representation. b) Agency by Necessity:Where agent is authorised an to do certain act, and while doing such an act, an emergency arises, he acquires an extra-ordinary or special authority to prevent the principal - Anand Sir has large farm on which Harshad Sir is the caretaker. When Anand Sir is in Canada. there is huge fire on the farm. Harshad sir becomes an agent for Anand Sir of to the necessity so as save property from being destroyed by fire. Anand sir (the principal)will be liable for any expenses, Harshad sin This agent) incurred to put outthe fire and save the farm. 3) Agency by operation oflaw:- When law treats one person as an agent of other of person as to acts done for him without 4) Rights his effect of ratification: authority, Ratification means approving a previous act or transaction. Essentials of a valid Ratification: - a) Ratification may be express or Implied b) No valid ratification can be made by a person whose ofthe facts ofthe knowledge case is materially defective. c) there can be ratification ofan act in entirely or its rejection in entirely. The principal cannot ratify a part ofthe transaction which is beneficial to him and reject the rest. d) Ratification cannot injure third person e) Ratification must be made within a reasonable period oftime.  6) Ratification must be communicated to the other party. 9) Act to be ratified should not be void or illegal. Extent ofAgent's Authority: - a) Agent's authority in normal circumstances; An Agent having authority to carry on a business an has authority to do every lawful thing necessary for the purpose, or usually done in the course ofconducting such business. b) Agent's authority in an emergency: - An Agent has authority, in an emergency, to do all such acts for the purpose ofprotecting his principal From loss as would be done by a person of ordinary prudence, in his own case, under similar circum. - stances.  Sub-Agents · When agent cannot delegate: - An Agent cannot lawfully employ another to perform acts he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom oftrade a sub-agent may or from the nature ofAgency, a sub-agent must, be employed. · Sub-agent: A sub-agent is person a employed by and acting under the control ofthe original agent in the business ofthe agency. Exception where an agent can appoint sub-agent: 2) Ifthe terms ofappointment originally contemplated it. 2) Customs ofthe trade may provide for appointment of sub-agents. for 3)Unforeseen emergency arise making it necessary to authority him delegate the that was given to him by principal.  Representation ofPrincipal by sub-agent properly appointed i 1) Principal is liable to third parties for the acts of sub-agent. the 2) Agents responsibility for sub-agents. 3) sub-agents liability to principal. · Agent's responsibility for sub-agent appointed without authority: 1) The Agent is responsible for his acts both to the principal and to third persons. 2) The Principal is responsible for his acts ofthe sub-agent 3) The sub-agent is not responsible to the principal at all. He is answerable only to the agent. substituted Agent - · substituted Agent is a person appointed by the agent to act for the principal, in the business of agency with knowledge the and consent of the principal · they are agents ofthe principal. Where an agent, · holding an express or implied authority to name another person to act for the the business ofthe has named principal in agency, another person accordingly, such person is not a sub-agent butan agent ofthe principal for such part ofthe business ofthe agency as is entrusted to him. In selecting such agent for his principal, an agent is bound to excercise the same amount ofdiscretion as a man ordinary of prudence would excercise in his own case and, if he does this, he is not responsible to the principal for the acts or negligence ofthe agent so selected. Diffrence between Sub-Agent and substituted Agent: Duties and Obligations ofan Agent - to follow instructions i) Duty or customs: - An Agent is bound to conduct the business ofhis to the direction principal according given by the principal in the absence any such directions, according of or to the customs which prevails in doing business ofthe same kind at the place where the agent conducts such business When the agent acts otherwise and loss is sustained any by the Principal, he must indemnify him and if any profit accrues, he must account for it. of reasonable and skill: 11) Duty care - theagent is always bound to act with reasonable diligence and to use such skill as he possess and to make compensation to his principal in respect ofthe direct consequences ofhis own neglect, want of skill zu misconduct butnot in respect ofloss ofdamage which are indirectly or remotely caused by such neglect, want of skill or misconduct. iii) Duty to render proper accounts: An Agent is bound to render proper accounts to his principal on demand. iv) Agent's duty to communicate with principall of It is the duty ofan agent, in cases difficulty, to use all reasonable diligence in communicating with his principal and in seeking to obtain his instructions. v] Duty not to deal on his own accounti- Agent should not deal on his own account without the consent ofthe First obtaining principal. Otherwise the principal may- as repudiate the transaction. b) claim from the agent any benefit which may have resulted to him from the transaction. vi] Duty not to make secret profits; Itis the duty ofan agent not to make any secret profitin the business or agency vii] Duty not to delegate: - An Agent cannot lawfully employ to perform acts which he has expressely or impliedly to perform personally viii] Agent's duty to sums recieved or principal: pay the Agent is bound to to his principal all pay sums received on his account. ix] Duty not to use confidential information any recieved in the course of agency against the principal Rights ofan Agent: is Right of retain outofsums recieved on principal's accounti- Agentcan retain, outof any sums recieved on account ofthe principal in the business ofthe agency For the following payments,  a] all moneys due to himselfin respect of advances made. b) of incurred In respect expenses properly by him in conducting such business. c) Such remuneration as may be payable to him for acting as agent ii) Right to remuneration: - The agent the in normal course is entitled for remuneration as per the contract. iii) Agent's lien on principal's property, An Agent is entitled to retain the papers and goods, other property whether movable or immovable ofthe principal recieved by him, until the amount due to himself for commission respect for the same has been paid on accounted for him. iv] Right to indemnity a) Right ofindemnification for lawful acts: - the principal is bound to agent indemnity the against all consequences of lawful acts done in exercise ofhis authority. b) Right of indemnification against acts done in good Faith: - where the agent acts in good faith on the instruction ofprincipal, agent is entitled for indemnification of any loss or damage from the principal. 1) Non-liability ofemployer ofagent to do a criminal acti- where one person employs another to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied promise, I against the consequences ofthat act. indemnity him v] Right to compensation for injury caused by principal's neglect: - the Principal must compensate his respect of agent in caused 'to such agent due to principal's neglect or injury want of skill. third Parties; Principal's liability to i) Principal's liability for the Acts of the agents Principal liable for the acts ofagentswhich are within the scope ofhis authority. ii) Principal's liability when agent exceeds authority - When an agent does more than he is authorised to do, and when the part ofwhat he does, which is within his authority, can be separated from the part which is beyond his authority, so much only ofwhat he does as is within his authority is binding as between him and his principal. iii) consequences ofnotice given to agent - Provided it be given or obtained in the course ofthe business transacted by him for the principal, shall, as between the principal and third parties have the same obtained legal consequence as ifithad been given to or by the principal. iv) Principal's liability for the agent's fraud, misrepresen - -tation or forts: - Misrepresentations made, or frauds committed, by agents acting in the course oftheir business for their principals, have the same effect on agreements made by such agents as if misrepresentations or frauds had been made or committed by the principals butmisrepre- made frauds committed -sentations or by agents in matters which do not fall within their authority, do not arrect their principals. Personal ofAgent to third parties; liability An Agent cannot enforce contracts entered personally into by him on behalf ofhis principal, nor is he personally bound by them. He can niether sue nor be sued on contracts made by him on his principal's behalf. Exceptions: - 1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad, foreign principal 2) Where the agent does not disclose the name ofthe principal or undisclosed principal (principal unnamed) i 3) Non-existent or incompetent principal: - Where the principal, though disclosed, cannotbe sued. The agent is presumed to be personally liable. 4) Pretended agent:If the agent pretends but is not an actual agent and the principal does not rectify the act butdisowns it, the pretended agent will be himself liable 5) When agent exceeds authority:When the agent exceeds his authority, misleads the third person in believing that the agent he has the requisite authority in doing the actthen the agent can be made liable personally for the breach of warranty of authority. Rights ofThird parties; - contractmade undisclosed is Right of parties to a by agent: - Ifan Agent makes a a person who contract with neither knows, nor has reason to suspect that he is an agent, his principal may require the performance ofthe contract butthe other contracting party has, as against the principal, the same right as he would have had as against the agent ifthe agent had been the principal. ii) performance ofcontractwith agent supposed to be principali does notdisclosed thathe is When agent acting as an agent & the principal requires performance the subject to the rights & obligations subsisting between the agent & the other to the contract. party iii) Option to third person:- sue the Agent or the principal: - a) Right ofperson dealing agent with personally liablet In cases where the agent liable, is personally a person dealing with him may hold either him or his principal or both ofthem, liable. by consequence ofinducing agent or principal to act on beliefthat principal or agent will be held exclusively liable - When a person who has made a contract with an agent induces the agent to act upon the beliefthat the principal only will be held liable or induces the principal to act upon the beliefthat the agent only will be held liable, he cannotafterwards hold liable the agent or principal respectively. Revocation ofAuthority: - ) Termination ofAgency: 2) Erects oftermination:- The termination of the authority ofan agent does not, so far as regards the agent, take errectbefore it becomes known to him, or, so far as regards third persons, before itbecomes known to them. 3) When the is irrecovable? Agency When theagent is personally intrested in the subjectmatter ofagency the agency becomes inexorable "Where the agent has himselfan interestin the property which forms the subject matter of the agency, the the absence ofan express contract, be agency cannot in to the prejudice of such interest " terminated “Yeh tho bas Indian Contract Act tha, Baki Ka syllabus toh Abhi Baki hai mere dost !”