Law of Agency Lecture 5 PDF

**LAW OF AGENCY** **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 (Sec. 226).** Exampl...

**LAW OF AGENCY** **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 (Sec. 226).** Example Ali, being Bilal's agent with authority to receive money on his behalf, receives from Cathy a sum of money. Cathy is discharged of his obligation to pay the sum in question to Bilal. (For example, if Ali is acting as Bilal\'s agent and has permission to collect money for Bilal, and then Ali receives money from Cathy on Bilal\'s behalf, it\'s legally the same as if Bilal had collected the money directly. So, Bilal doesn\'t owe that money to Cathy anymore. This rule is outlined and it ensures that agreements and actions made through agents are legally binding and have the same effects as if the principal (the person the agent is representing) did them in person. Any person who is competent to contract i.e. who is of the age of majority and who is of sound mind, may employ an agent (Sec. 183). Whatever a person can do personally, he can do through an agent. An **"agent"** is a person employed to do any act for another or represent another in dealings with third persons The person for whom this agent is hired is called the **principal** **ENFORCEMENT AND CONSEQUENCES OF AGENT'S CONTRACTS** The function of an Agent is to bring about contractual relations between the Principal and third parties Usually, Agents are appointed with specific instruction and authorized to act within the scope of their instructions Acts of the Agent within the scope of the instructions bind the Principal as if he has done the deal himself ***Quit facit per alium facit per se*** --- "He who does through another does by himself" As in, the act of the Agent is the act of the Principal. EXAMPLE: A lawyer would be an Agent for his client (who would be the Principal) **WHO CAN APPOINT AN AGENT?** Any person who is of the (1) age of majority, and (2) of sound mind **WHO MAY BE AN AGENT?** Any person may be an Agent --- even a minor **JOINT PRINCIPALS** Several Principals can jointly appoint one Agent. **CONSIDERATION IN AGENCY CONTRACTS** No consideration is necessary to create an Agency The Agency contract generally provides for the amount of remuneration payable by the Principal to the Agent **THE EXTENT OF AN AGENT'S AUTHORITY** An Agent who has the authority to act as an Agent has every lawful right to act for that specific purpose. EXAMPLE: Sasha, a lawyer, is employed by Selena to recover money from Matt. Sasha can take any legal measures to try to recover the money for Selena from Matt. **EFFECTS OF NOTICE TO AGENT** Any notice given to an Agent or information that is obtained by an Agent, will be treated as if the information was notified to the Principal. **MISREPRESENTATION AND FRAUD BY AGENTS** Misrepresentations made, or frauds committed, by Agents, acting in the course for their Principals, have the same effect on agreements made by such Agents as if such misrepresentations or frauds had been made or committed by the Principals. HOWEVER, misrepresentations made or frauds committed by Agents that do not fall within an Agent's authority, do not affect their Principals **Agent and Servant:** 1. An agent is appointed and employed to bring the principal into contractual relationship with third parties. The servant cannot do that. 2\. An agent can bind the principal to the third parties. A servant cannot do so. 3. The mode of remuneration of an agent may vary, including a commission on the basis of the work done. A servant is generally paid through wages. 4\. An agent may work for several principals. A whole-time servant serves only one master. **Kinds of Agents:** Agents are basically of two kinds -- \(a) Mercantile Agent and \(2) Non-Mercantile Agent. **Mercantile Agent:** A 'mercantile agent' is an agent having in the customary course of his business, authority to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods. **Non-Mercantile Agent:** Who represent their principals, in transaction other than those of sale or purchase of goods, are non -mercantile agents. For examples, directors and secretary of a company act as the agents of the company while dealing with third persons. Similarly, professional advisers often act as agents of their clients while representing them before any public authority. **Sub-agent:** A Sub-agent is a person appointed by an agent acting under the control of the original agent in the business of the agency. It is important that a sub agent is must be appointed by an agent and must work under the control of the agent. If the appointment of a sub-agent is improper, the principal would not be bound by such appointment. However, the agent will be responsible to the principal for any act of the sub agent. Further the agent shall be personally responsible for the acts of the sub agent, towards the third parties (Sec. 193). **METHODS OF CREATING AGENCY** 1\. EXPRESS AGREEMENT : Oral or written 2\. IMPLIED AGREEMENT : Agency agreement may be implied under certain circumstances from the \(a) conduct of the parties, or \(b) the relationship between them EXAMPLES: \(i) Agency by Estoppel, and \(ii) Agency of Necessity \(i) Agency by Estoppel When a man has, by his conduct or statements, induced others to believe that a certain person is his Agent, he is precluded from subsequently denying it EXAMPLE: Generally, servants are NOT Agents of the Master Jack allows his servant, Jill, to buy goods for him regularly on credit. On one occasion, the servant (Jill) bought goods on credit that were not ordered by Jack. Jack would be required to pay the shopkeeper because in this case, the servant (Jill) is the Agent of Jack --- the Master. \(ii) Agency of Necessity In certain cases, a person is forced to act on behalf of another person without any express authority from him. In such cases, an Agency of Necessity is created. 3 conditions MUST be satisfied for an Agency of Necessity to be created: \(a) It must be impossible to get the Principal's instructions; \(b) There must be an actual necessity for acting on the Principal's behalf; and \(c) The Agent of Necessity must act honestly in the interest of the parties concerned Husband and Wife A wife is an Agent of Necessity, having power to pledge her husband's credit for necessities of life. HOWEVER, if the husband gives her an allowance, she has NO AUTHORITY to pledge his credit and can NEVER be an Agent of Necessity In Gray Ltd v Cathcart (1922), A wife bought clothes valued at £215 from a shop. She didn't pay the shopkeeper and pledged the money to her husband's credit. The husband also refused to pay because he was giving her an allowance of £960 per year. The shopkeeper sued the husband. Because the husband paid the wife £960 per year, the wife is not an Agent of Necessity and the wife is bound to give the money to the shopkeeper. GENERAL RULES \(a) The wife is not the Agent of the husband; \(b) The husband is the not Agent of the wife; and \(c) But, one of them can be an Agent for the other if required. Agency exists whenever a person can bind another by acts done on his behalf. When this power does not exist the relationship is not one of agency. Thus a wife is not the agent of the husband except under special circumstances and for special purposes. **AGENT'S DUTIES TO PRINCIPALS** 1\. AN AGENT IS BOUND TO CONDUCT THE BUSINESS OF HIS PRINCIPAL ACCORDING TO THE DIRECTIONS GIVEN BY THE PRINCIPAL, OR, IN THE ABSENCE OF ANY SUCH DIRECTIONS, ACCORDING TO THE CUSTOM WHICH PREVAILS IN THE INDUSTRY 2\. AN AGENT IS BOUND TO RENDER PROPER ACCOUNTS TO HIS PRINCIPAL ON DEMAND, OR PERIODICALLY IF SO PROVIDED IN THE AGREEMENT 3\. IT IS THE DUTY OF THE AGENT, IN CASES OF DIFFICULTY, TO USE ALL REASONABLE DILIGENCE IN COMMUNICATING WITH HIS PRINCIPAL, AND IN SEEKING TO OBTAIN HIS INSTRUCTIONS 4\. IF AN AGENT, WITHOUT THE KNOWLEDGE OF HIS PRINCIPAL, DEALS IN THE BUSINESS OF THE AGENCY ON HIS OWN ACCOUNT, INSTEAD OF ON ACCOUNT OF HIS PRINCIPAL, THE PRINCIPAL IS ENTITLED TO CLAIM FROM THE AGENT ANY BENEFIT WHICH MAY HAVE RESULTED TO HIM FROM THE TRANSACTION EXAMPLE: John directs Sabrina to buy a certain house for him. Sabrina tells John that it cannot be bought as the seller has no intention of selling the house. Sabrina then buys the house for herself. On discovery, John may compel Sabrina to sell the house back to John at the price she originally paid for. **PRINCIPAL'S DUTIES TO AGENTS** 1. THE PRINCIPAL MUST MAKE COMPENSATION TO HIS AGENT IN RESPECT OF INJURY CAUSED TO SUCH AGENT BY THE PRINCIPAL'S NEGLECT OR WANT OF SKILL **PRINCIPAL'S RIGHTS** 1\. THE PRINCIPAL IS ENTITLED TO COMPENSATION FOR ANY BREACH OF DUTY BY THE AGENT 2\. THE PRINCIPAL CAN REVOKE THE AGENT'S AUTHORITY **AGENT'S RIGHTS** 1\. IN THE ABSENCE OF ANY SPECIAL CONTRACT, THE AGENT'S REMUNERATION DOES NOT BECOME DUE UNTIL HE HAS COMPLETED THE ACT FOR WHICH HE WAS APPOINTED AS AGENT. 2\. IN THE ABSENCE OF ANY CONTRACT, AN AGENT IS ENTITLED TO RETAIN GOODS, PAPERS, AND OTHER PROPERTY, WHETHER MOVABLE OR IMMOVABLE OF THE PRINCIPAL, RECEIVED BY HIM, UNTIL THE AMOUNT DUE TO HIMSELF FOR COMMISSION, AND SERVICES HAS BEEN PAID TO HIM