Law of Agency
Who is an Agent and a Principal? (Sec.
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
The relationship between them is called
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
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
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
Creation of Agency
Agency by agreement (Section 186 &
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
Rules Governing Ratification
Act must be done by a person on behalf
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-
Principal must be competent to ratify
both at the time of contract and at
time of ratification.
It must be done within a reasonable
It can be for whole contract and not
part of it.
It should not put a third party to
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
Sub-agent: An agent appointed by the
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
Agent’s capacity to bind the Principal is
Agent does certain acts on behalf of
His authority extends to such acts
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
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
When Agency cannot be
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.
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
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
To Repudiate contract (Section 215).
To claim benefits (Section 216).
To ratify or disown agent’s acts
To revoke Agent’s authority (Section
To claim on loss or profit (Section 211
To demand accounts (Section 213).
To refuse remuneration when agent is
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.