m
  

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V When people do business, they often deal with
each other directly
Buyer 6 6 6eller

V Mowever, sometimes they deal with each other

using a ³middleman´ (or representative or
Ô
Ô

Buyer 6 iddleman 6 6eller

V 3he legal relationship between the middleman

and the businessperson is governed by the
›


V 3he legal term for a middleman or
representative is an 
V 3he person who is represented by the agent is
called the „

„ ›
V n agent is a person who is authorized to
represent another person, who is called the
principal.
V 3he agent creates a legal relationship
between the principal and a third party
that¶s called the agency.

x
áefinition of gency (cont

V 3herefore, any contract entered into is

between the principal and the third party, even
though it is arranged by the agent

V 3he agent does not usually get any rights or

responsibilities under the contract and he
usually get Commission.

V 3herefore, it is the principal who must have

the capacity to contract and not the agent

¦
V ote: a franchising arrangement where one
person allows another person to run a business
using the original name of the business is not a
form of agency

V Eg cáonalds
V Eg Kfc etc.


V   ›  has the power to act for the
principal in all business matters
V  „
›  only has the authority of the
principal for one transaction
V  { 
  has limited authority to
introduce potential clients to the principal. Me
does not have the authority to negotiate or
enter into contracts on behalf of the principal
V  à


  is appointed by a
supplier to arrange for distribution of the
supplier¶s goods in a particular place.

^
3he principal/agent relationship can be created in
several ways

    

   

  
  

 
   

Õ
V 3he authority given by a Principal to his agent is an
express authority.

V In such case appointed either by word±of±mouth

any agreement in writing.

V 3his is the most common way of creating an

agency

V 3he agent is specifically appointed by the principal

for a particular task or a general function

V It can be done by contract, but this is not

necessary
ÿ
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r rt i irt , r 

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t r it t riri t    t f t 
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it
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§§
V n agency may emerge by the application of
doctrine of estoppels. this doctrine in the present
context would mean that when a person has held
another person to believe by his words.

V 3here are 2 conditions for estoppels to apply

1.3he µprincipal¶ must have made a
representation that the µagent¶ had his
authority
2.3he party who claims there has been estoppel
must have relied on the principal¶s
representation

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Eg.
V  child purchase goods from a shop and
desire the shopkeeper to collect payment from
his parents later. 3he parents, through not
bound to pay make the payment .after a few
days, the child again makes purchases from
the shop on the parents. 3he parents would
be bound this time because by making
payment earlier without razing any objection,
they held their child out as their agent for
making such purchases.

§¦
V In this case, a person who does not have the
authority of the principal enters into a contract
with a third party on behalf of the principal

V Ratification occurs when the principal expressly

accepts the contract later

V e.g. K got goods of  insured without his

knowledge or authority.  may ratify the policy
taken by K. in that case the insurance policy
shall be valid as if K had been authorized to do
the act.
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 §ÿÚ
  


ny person who is the age of

majority according to the law to which he is
subject & who is of sound mind, may employ
agent (s-183
a minor can not appoint agent to
do contract. If agent acts for minor, he will be
liable to the third party.
  


 i r  t  i t
  t 


lt. N r  i t f t  f
 jrit

f 
i
 
 t,  t  r il t i ri i l (-
4
  

( c  who is a 
 agent ?

gent who sells products and services for the

principals to the third party and guarantees
that the buyer will pay for them. otherwise
the agent will pay the amount the buyer failed
to pay,
 -
V  
    

 


where agent does an act for his principal but

without knowledge of authority or where he
exceeds the given authority, the principal is not
held bound by the ratification. Mowever (s-196
permits the principal , if he so desires , to ratify
the act of the agent.
1 3he principal must have been in existence
at the time the agent originally acted.

2 3he principal must have contractual

capacity at the time of contract as well as
the time of ratification. inor can not ratify
the contract.

3 Ratification must be made within a

reasonable time. It differ according to
case.
x 3he act to be ratified must be a lawful
one. 3here can be no ratification of an
illegal act or an act which is void.

5 3he principal should have full knowledge

of the facts (s-198

6 Ratification must be of the contract as a

whole. 3he principal cannot reject the
burden and accept only the benefits.
V 6ec 196, permits the principal if so
desires may ratify the act of the
agent. If he feels that it will have the
same effect as if the act was
originally done by his authority.
 Ô {„›
V Pawan makes an offer to Badal, á of a
company. Badal accepts the offer though he
has no authority to do so. Pawan
subsequently withdraw the offer, but the
company ratifies Badal¶s acceptance. Pawan
is bound by the offer. 3he ratification by the
company relates back to the time Badal
accepted the offer.
×

   
  
  à 
   
  à   ›
›




  
 à  à
 
§. T 
t t i  f  

r
i t t ri i l¶
irti .

(S- §§
. T  t l

t t i 
it t ill

ili  
(S-§
3. 3o render proper account (6-213
x. 3o communicate with the principal in case
of difficulty (6-21x
5. ot to make any secret profits.
6. ot to deal on his own account.
7. o entitled to remuneration for
misconduct (6- 220
8. ot to disclose confidential information
supplied
9.3o take all reasonable steps for the
protection and preservation of the
interests entrusted to him
×


    „   ››  
    à
  
{ 
 › 
 „

„ › 
 
„   ››  à  {

V 6ec 230
1. Where the contract is made by agent
for the sale or purchase of goods for a
merchant resident abroad.
2. Where the agent does not disclose the
name of his principal
3. Where the principal is disclosed, can
not be sued, if principal is minor
gent incurs a personal liability in
the following cases
1. Breach of warranty
2. Where the agent expressly agrees to be
personally bound
3. Where agent signs a negotiable
instrument in his own name
x. gent with special interest or with a
beneficial interest
5. When agent is guilty of fraud of fraud or
misrepresentation in matters which do
not fall within his authority.
6. Where trade usage or custom makes
agent personally liable

7. Where the agency is one coupled with

interest
1. Where expressly permitted by the
principal.
2. Where the ordinary custom of the
trade permits delegation.
3. 3he nature of agency is such that it
can not be accomplished without the
appointment of a sub ±agent.
x. Where the nature of the job assigned
to the agent is purely clerical and does
not involve the exercise of discretion.
5. In unforeseen emergency.
V Without having the authority to do so, has
appointed a sub-agent, the principal is not
represented by or responsible for the acts of
such a sub-agent.
V 3he sub-agent can only bind the agent by
contracts entered in to with third parties.
V When agent appoints or names another person
for being appointed in his place, such person is
called a substituted agent. [sec. 19x
 Ñ




Ñ
 
 

V gent is entitled to his agreed commission

or remuneration if there is no agreement,
to a reasonable remuneration.
V when the object of agency is deemed to
have been carried out or the act assigned
to the agent is completed would depend on
the terms of the contract
 Ú

O   Ú


gent may retain, out of any sums received on

account of the principal in the business of the
agency, all moneys due to himself in respect of
advances made or expenses properly incurred by
him in conducting such business and also such
remuneration as may payable to him for acting as
agent.



   ÚÚ 

In the absence of any contract to the

contract to the contrary, agent is entitled to
retain goods, papers and other property.
 x

 
O
 O 

- when principal has become insolvent.

- when buyer¶s has become insolvent.
 ¦

  O
 ÚÚÚ ÚÚx

3he principal is bound to indemnify agent

against the consequences of all lawful acts
done by the agent in exercise of authority
conferred on him.
A
 " 
  

"   
 
     2     

$ 30ÚÚ4
   
  .  
         "



  
    $ 30ÚÚx4
 3he principal must make compensation to his
agent in respect of injury caused to such
agent by the principals neglect or want of
skill.
V Circumstances under which gency
3erminates or Comes to an End
1.On revocation by the principal.
2.On the expiry of fixed period of time.
3.On the performance of the specific
purpose.
x.Insanity or death of the principal or
agent.(s.209
Conti..
5.6ubject matter is either destroyed or rendered
unlawful.
6.Insolvency of the principal.
7.By renunciation of agency by the
agent.(s.205
If principal can cause termination of agency by
revocation,agent may renounce his agency by
giving a sufficient notice to that affect. Where,
agency is for fixed period and the agency is
renounced without a sufficient cause,the
principal must be compensated.
1.Where the authority of the agent is 

   
  i.e.,the agent has
an interest in the subject-matter of the
contract.
2.3he principal cannot revoke the authority
given to his agent     

      so far as regards
such acts and obligations already done in
the agency.
V 3he employer of an agent is bound to
indemnify the agent against the consequences
of all lawful acts done by such agent in exercise
of the authority conferred upon him
-(sec.222
X riable to indemnify agent against the
consequences of an act done in good faith,
though it causes an injury to the rights of third
persons. -(sec.223
 Conti«
V 3he principal is, however ,not liable for acts
which are criminal in nature through done
by the agent at the instance of the principal
-(sec.22x
V Bound to compensate his agent in respect
of injury caused to such agent by the
principal¶s neglect or want of skill
±(sec.225
 riability of Principal to
3hird Party
1.gent being a mere connecting link binds the
principal for all his acts done within the scope
of his authority(sec.226

2.3he principal is liable for the acts of the agent

failing not only within the actual authority but
also within the scope of his apparent or
ostensible authority.
Conti«
3.Where agent exceeds his authority and part
of what he does, which is within his authority,
can be separated from the part which is
beyond his authority, so much only of what he
does as is within his authority is binding as
between him and his principal.(sec.227
† Where an agent does more than he is
authorized to do, and what he does beyond
the scope of his authority cannot be separated
from what is within it, the principal is not
bound to recognize the transaction.(sec.228
V isrepresentation made, or frauds committed, by
agents acting in the course of their business 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; but
misrepresentations made, or frauds committed,
by agents, in matters which do not fall within
their authority, do not affect their principals.
(sec.238
a ti
5.3he pri cipal remai s liable t the third
parties eve where his ame was t
disclsed. 3he third parties,  discveri g his
ame,
 
  Ô 
Ô 






3he pri cipal is bu d by a y tice r
i frmati give t the age t i the curse f
busi ess tra sacted by him.
xÕ