Agency under the Indian Contract Act

 Who Is An Agent?

An agent is one who is:

1. Employed by another (the principal);

2. To do any act for that principal; or

3. To represent him in dealing with third persons.

An agent is a person employed to do any 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 called the ‘principal’.

1. The Indian Contract Act of 1872 does not make any distinction between different classes of agents. On one hand an agent may be appointed by the principal, it also includes an employment by any authority authorised by law to make the employment.

2. Agents are distinguished in respect of authority as general or special agents. The former expression includes brokers, factors, partners, and all persons employed in a business of filling a position of a generally recognised character, the extent of authority being apparent from the nature of employment or position; the latter denotes an agent appointed for a particular occasion or purpose, limited by the employment. A special agent has only authority to do some particular act for some special occasion or purpose which is not within the ordinary course of his business or profession. This distinction is made to determine the authority of that agent.

It has been stated:

“A General agent has the full apparent authority due to his employment or position and the principal will be bound by his acts within that authority though he may have imposed special restrictive limits which are not known to the other contracting party."

" A Special agent has no apparent authority beyond the limits of his appointment and the principal is not bound by his acts in excess of those limits whether the other contracting party knows of them or not.”

DUTIES & RIGHTS OF AN AGENT

Under the Indian Law, the Agent has certain duties. An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in absence of any such directions, according to the custom which prevails. It is the duty of every agent to carry out the mandate of his principal. An agent is bound to conduct the business of the agency with as much skill as is reasonable. An agent is bound to render proper accounts to his principal on demand. It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions. If an agent deals on his own account in the business of the agency, the principal may repudiate the transaction.

The important rights of an agent can be seen as well. In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act. An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business that he has misconducted. An agent may retain all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business. The employer of an agent is bound to indemnify him against the consequences of all lawful acts done within the authority. Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act. Where one person employs another to do an act which is criminal, the employer is not liable to the agent. 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.

AGENT’S AUTHORITY

It has been seen in the case of Palestar Electronics Private Limited v. Additional Commissioner that the acts of the agent within the scope of his authority bind the principal. Contracts entered into through an agent, and obligations arising from acts done by the 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. It is necessary for this effect to follow that the agent must have done the act within the scope of his authority. The authority of an agent and more particularly its scope are subjects to some controversy.

The uncertainty is largely due to the fact that the authority of an agent does not depend upon one source. It has been rightly held in the case of Ramlesh v. Jasbir Singh that agency came into being to promote and not to hinder commerce.

The authority of an agent means his capacity to bind the principal. It refers to “the sum total of the acts it has been agreed between principal and agent that the agent should do on behalf of the principal.” When the agent does any such acts, it is said he has acted within his authority as was seen in the case of Nand Lal Thanvi v. LR of Goswami Brij Bhushan.

With regards to contracts and acts which are not actually authorised, the principal may be bound by them, on the principle of estoppels, if they are within the scope of the agent’s ostensible authority, but in no case is he bound by any unauthorised act or transaction with respect to persons having notice that the actual authority is being exceeded.