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Agency - Indian Contract Act 1956

Aug 23, 2014

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Akash Kejriwal

Contract of Agency - Indian Contract Act, 1956
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Page 1: Agency - Indian Contract Act 1956
Page 2: Agency - Indian Contract Act 1956

INDIAN CONTRACT ACT,1872

CONTRACT OF AGENCY

Page 3: Agency - Indian Contract Act 1956

As per Section 182 of Indian Contract Act,1872 ;

“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 represented is called the principal” .

A contract of agency is one by which an agent is authorised to establish privity of contract between agent and third party.

Definitions of Agent & Principal

Page 4: Agency - Indian Contract Act 1956

THE PRINCIPAL – AGENT RELATIONSHIP

PRINCIPAL

THIRD PARTY

AGENT

Principal’s

obligation to

perform

the

contract

Contract with third party on behalf of principal

Agenc

y Co

ntra

ct

Page 5: Agency - Indian Contract Act 1956

Essentials of a Valid Agency

Agreement between principal and agentThe person must act in representative

capacity.The principal must be competent to contract.Agent may not be competent to contract.No consideration required.

Page 6: Agency - Indian Contract Act 1956

General Rules Of Agency

All acts which a person can do himself can be done.

Agency is based on the principal – “ he who does the thing through another does it himself.

Page 7: Agency - Indian Contract Act 1956

TEST OF AGENCY Every person working for another is not an

agent.DISTINGUISHING FEATURES

OF AN AGENT

Representative character(so as to create contractual

relations)

Derivative authority

Page 8: Agency - Indian Contract Act 1956

DIFFERENCE BETWEEN AGENT AND SERVANT

REPRESENTATIVE CHARACTER

CONTROL & SUPERVISION

LIABILITY REMUNERATION

COMPENSATION

Page 9: Agency - Indian Contract Act 1956

WHO MAY EMPLOY AN AGENT?•Any person competent to contract

WHO MAY BE AN AGENT?

• Any person- (even a minor or a person of unsound mind)

Page 10: Agency - Indian Contract Act 1956

CONSIDERATION FOR CREATION OF AGENCY

No consideration is necessaryFact that principal has agreed to be

represented by the agent is a sufficient ‘detriment’ to the principal to support the contract of agency

Usually an agent is paid for his services.

Page 11: Agency - Indian Contract Act 1956

CREATION OF AGENCYAn agency may be created in any of the

following ways:

CREATION OF AGENCY

AGENCY BY RATIFICATION

AGENCY BY EXPRESS

AGREEMENT

AGENCY BY IMPLIED

AGREEMENT

Page 12: Agency - Indian Contract Act 1956

AGENCY BY EXPRESS AGREEMENT (SEC. 187)

Express authorityAgent appointed by words of mouth or by an

agreement in writing.Power of attorney is the usual form of a

written contract of agency.

Page 13: Agency - Indian Contract Act 1956

AGENCY BY IMPLIED AGREEMENT

No express agreementInferred from the circumstances of the case or

from conduct of the parties or from relationship between the parties.

Such an agency may take the following forms: *Agency by Estoppel *Agency by Holding out *Agency by necessity

Page 14: Agency - Indian Contract Act 1956

AGENCY BY ESTOPPEL ( Sec. 237 )

Based on ‘Doctrine Of Estoppel’. When an agent has, without authority, done acts

or incurred obligations to third persons on behalf of his principal . The principal is bound by such acts or obligations, if he has by his words or conduct induced such third person to believe that such acts and obligations were within the scope of agent’s authority.

Page 15: Agency - Indian Contract Act 1956

Agent by Holding Out Based on ‘Doctrine of Holding Out’ which is a

part of the law of estoppel.It’s almost same as agency by estoppelBut unlike ‘agency by estoppel’, it requires some

affirmative or positive act or conduct by the principal to establish agency subsequently.

Page 16: Agency - Indian Contract Act 1956

AGENCY BY NECESSITY In certain circumstances the law confers an authority on one person to

act as agent for another without any regard to the consent of the principal. Such an agency is called agency by necessity.

Where the agent exceeds his authority, bona fide, in an emergency Where the carrier of goods acting as bailee, does anything to protect or

preserve the goods, in an emergency Where a husband improperly leaves his wife without providing proper

means for her sustenance

Page 17: Agency - Indian Contract Act 1956

AGENCY BY RATIFICATIONSection 196 deals with the effect of ratification.

Ratification means the subsequent adoption and acceptance of an act originally done without instructions or authority.

Ratification relates back to the time of contract that is ratification has retrospective effect.

According to Section 197, ratification may be express or implied.

Page 18: Agency - Indian Contract Act 1956

ESSENTIALS OF A VALID RATIFICATION

o The agent must purport to act as agent for a principal who is in contemplation.

o There should be act capable of ratification.

o The principal must be in existence.o The principal must be competent to

contract

Page 19: Agency - Indian Contract Act 1956

The principal must have full knowledge of material facts.

Whole transaction must be ratified.Ratification must be done with in a

reasonable time of the act purported to be ratified.

Ratification must not injure a third person.

Page 20: Agency - Indian Contract Act 1956

EXTENT OF AGENT’S AUTHORITY

The authority of an agent means his capacity to bind the principal to third parties. The scope of agents authority is determined by his:

Actual Authority Express actual authority Implied actual authorityApparent AuthorityAuthority in Emergency

Page 21: Agency - Indian Contract Act 1956

PERSONAL LIABILITY OF AGENT TO THIRD PARTY

According to Section 230 an agent cannot personally enforce contracts entered into by him on behalf of the principal, nor he can be personally liable for them, unless there is a contract to the contrary.

Exceptions to this ruleWhere the agent expressly agreesWhere the agent acts for a foreign principalWhere the agent acts for an unnamed principal

Page 22: Agency - Indian Contract Act 1956

Where the agent acts for an undisclosed principal

Where the agent acts for a principal who cannot be sued

Where the agent exceeds his authorityWhere there is a trade usage or customWhere agent’s authority is coupled with interest

Page 23: Agency - Indian Contract Act 1956