Agency

No, Section 184 of the Indian Contract Act, 1872, states that as between the principal and third persons, any person may become an agent. This implies that even a minor or a person of unsound mind can be appointed as an agent. However, such a person would not be personally liable to the principal for their acts, as they are not competent to contract. The principal, however, would still be bound by the acts of such an agent towards third parties.

A principal has several rights against their agent, primarily arising from the agent's duties:

1. Right to recover damages for breach of duty (Section 211): If the agent fails to follow instructions or acts without reasonable care and skill, causing loss to the principal, the principal can claim damages.
2. Right to recover secret profit (Section 216): If the agent makes any secret profit out of the agency business without the principal's knowledge and consent, the principal has the right to recover such profit.
3. Right to resist agent's claim for remuneration (Section 220): If the agent is guilty of misconduct in the business of the agency, the principal is not bound to pay them any remuneration in respect of that part of the business in which the misconduct occurred.
4. Right to repudiate transaction (Section 215): If the agent deals on their own account in the business of the agency without first obtaining the consent of the principal and acquainting them with all material circumstances, the principal may repudiate the transaction.
5. Right to demand accounts (Section 213): The principal has the right to demand proper accounts from the agent.
6. Right to enforce contracts made by the agent: The principal can enforce contracts made by the agent on their behalf with third parties.

Creation of Agency:

1. By Express Agreement (oral or written)
2. By Implied Agreement (from conduct or circumstances)
3. By Necessity (emergency situations)
4. By Ratification (subsequent approval of unauthorized acts)
5. By Estoppel (when principal's conduct leads third party to believe agency exists)
6. By Holding Out (similar to estoppel)

Types of Agents:

• Factor: Sells goods in own name
• Broker: Negotiates but doesn't take possession
• Commission Agent: Buys/sells goods for principal for commission
• Del Credere Agent: Guarantees payment from third party
• Auctioneer: Sells by public auction
• Sub-Agent: Appointed by agent (with authority)

A contract of agency can be terminated in several ways, broadly categorized into termination by act of parties and termination by operation of law (Sections 201-210 of the Indian Contract Act, 1872):

I. By Act of Parties:

1. Revocation by the Principal (Section 203): The principal can revoke the agent's authority at any time before the agent has exercised their authority so as to bind the principal.
2. Renunciation by the Agent (Section 206): The agent can renounce the business of the agency by giving reasonable notice to the principal.
3. By Agreement: The principal and agent can mutually agree to terminate the agency.

II. By Operation of Law:

1. Completion of the Business of Agency (Section 201): When the specific task for which the agency was created is completed, the agency automatically terminates.
2. Expiry of Time (Section 201): If the agency was for a fixed period, it terminates upon the expiry of that period.
3. Death of the Principal or Agent (Section 201): The death of either party generally terminates the agency.
4. Insanity of the Principal or Agent (Section 201): If either the principal or agent becomes of unsound mind, the agency terminates.
5. Insolvency of the Principal (Section 201): The insolvency of the principal terminates the agency.
6. Destruction of the Subject-Matter: If the subject matter of the agency is destroyed, the agency terminates.
7. Principal becoming an Alien Enemy: If the principal and agent become alien enemies due to war, the agency terminates.

According to Section 183 of the Indian Contract Act, 1872, any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent. This means that a minor or a person of unsound mind cannot appoint an agent, as they are not competent to contract themselves. If such a person purports to appoint an agent, the appointment is void.

The maxim 'Delegatus non potest delegare' means 'a delegate cannot further delegate'. In the context of agency (Section 190 of the Indian Contract Act, 1872), this general rule implies that an agent, having been appointed to act for the principal, cannot delegate their authority to another person. The principal appoints an agent based on their personal skill, competence, and trustworthiness, and therefore, the agent is expected to perform the duties personally.

However, there are several exceptions to this rule where an agent can lawfully appoint another person to act for the principal:

1. By Custom of Trade: If the custom of the trade permits delegation, the agent may appoint a sub-agent.
2. By Principal's Consent: If the principal expressly or impliedly permits the agent to delegate, it is allowed.
3. By Necessity: In cases of unforeseen emergencies where delegation is absolutely necessary to protect the principal's interests, and communication with the principal is impossible.
4. Ministerial Acts: For acts that are purely clerical or ministerial and do not involve the exercise of discretion or skill (e.g., signing a document after approval).
5. Nature of the Work: If the nature of the work requires the appointment of another person (e.g., a lawyer engaging a junior counsel).
6. Non-performance of the act by the agent personally: If the agent cannot perform the act personally, and it is essential for the business.

An agency is considered 'irrevocable' and cannot be terminated by the principal in certain circumstances, primarily when the agent has an interest in the subject matter of the agency (Section 202 of the Indian Contract Act, 1872). The main situations are:

1. Where the agent has an interest in the subject-matter: If the agency is created to secure some benefit or interest for the agent, beyond mere remuneration, it is irrevocable. For example, if an agent is appointed to sell goods and is allowed to retain the proceeds to recover a debt owed by the principal to the agent.
2. Where the agent has partly exercised the authority: If the agent has already, in pursuance of the authority, incurred personal liability or done acts that bind the principal to third parties, the principal cannot revoke the agency so as to affect such acts already done.
3. Where the agent has incurred personal liability: If the agent has entered into a contract with a third party on behalf of the principal, and has incurred personal liability (e.g., due to trade custom or non-disclosure of principal), the principal cannot revoke the agency to escape this liability.

The Indian Contract Act, 1872, distinguishes between a 'sub-agent' and a 'substituted agent' based on their relationship with the principal and the original agent:

Sub-Agent (Section 191):

• Definition: A 'sub-agent' is a person employed by, and acting under the control of, the original agent in the business of the agency.
• Privity of Contract: There is no direct privity of contract between the principal and the sub-agent. The sub-agent is primarily responsible to the original agent, not to the principal.
• Liability: The original agent is responsible to the principal for the acts of the sub-agent. The sub-agent is responsible to the original agent. However, for acts of fraud or wilful wrong, the sub-agent may be directly liable to the principal.
• Appointment: Appointed by the agent, typically without the express knowledge or consent of the principal (though implied consent or custom may exist).

Substituted Agent (Section 194):

• Definition: A 'substituted agent' (or 'co-agent') is a person named by the agent, and selected by the principal, to act for the principal in the business of the agency.
• Privity of Contract: There is direct privity of contract between the principal and the substituted agent. The substituted agent is directly responsible to the principal.
• Liability: The original agent is not responsible for the acts of the substituted agent, provided the original agent exercised due care and diligence in selecting the substituted agent. The substituted agent is directly liable to the principal.
• Appointment: The original agent merely names or suggests a person, but the actual appointment is made by the principal. The original agent's role is limited to selecting a suitable person.

Agency by Ratification (Sections 196-200 of the Indian Contract Act, 1872) occurs when a person, without authority, acts as an agent for another, or an agent exceeds their authority, and the principal subsequently accepts or confirms those acts. This acceptance makes the principal bound by the acts as if they had authorized them from the beginning.

Essential conditions for a valid ratification are:

1. Act done on behalf of Principal: The agent must have professed to act on behalf of an identifiable principal, not on their own account.
2. Principal in Existence: The principal must be in existence at the time the act was done.
3. Competent Principal: The principal must be competent to contract both at the time of the act and at the time of ratification.
4. Knowledge of Facts: The principal must have full knowledge of all material facts related to the unauthorized act.
5. Ratification of Whole Transaction: Ratification must be of the entire transaction, not just a part of it.
6. No Damage to Third Party: Ratification must not subject a third party to damages or terminate any right or interest of a third person.
7. Lawful Act: The act to be ratified must be lawful.
8. Within Reasonable Time: Ratification must be done within a reasonable time after the unauthorized act.

The key duties of an agent towards their principal, as per the Indian Contract Act, 1872, include:

1. Duty to follow Principal's Instructions (Section 211): The agent must act strictly according to the directions given by the principal. In the absence of instructions, they must act according to the custom of the trade.
2. Duty to act with reasonable care and skill (Section 212): The agent must conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, and with reasonable diligence.
3. Duty to render proper accounts (Section 213): The agent is bound to render proper accounts to their principal on demand.
4. Duty to communicate with the Principal (Section 214): In cases of difficulty, the agent must use all reasonable diligence to communicate with the principal and obtain their instructions.
5. Duty not to deal on their own account (Section 215): If an agent deals on their own account in the business of the agency without the principal's consent and knowledge, the principal may repudiate the transaction.
6. Duty not to make secret profit (Section 216): An agent must not make any secret profit out of the agency business. If they do, the principal can claim such profit.
7. Duty not to delegate authority (Section 190): An agent cannot delegate their authority to another person (delegatus non potest delegare), unless permitted by custom, necessity, or the principal's consent.

A 'Contract of Agency' is a relationship where one person (the 'Agent') acts on behalf of another person (the 'Principal') in dealing with third parties. The Agent is authorized to create legal relations between the Principal and third parties. The 'Principal' is the person for whom the act is done or who is represented, and the 'Agent' is the person employed to do any act for another, or to represent another in dealings with third persons. The fundamental principle is that whatever a person can do personally, they can do through an agent, except for acts of a personal nature (e.g., singing a song).

A contract of agency can be created in several ways:

1. By Express Agreement (Section 187): This is the most common method, where the principal explicitly appoints the agent, either orally or in writing.
2. By Implied Agreement (Section 187): This arises from the conduct, situation, or relationship of the parties. It includes:
   • Agency by Estoppel: When a person, by their words or conduct, leads a third party to believe that another person is their agent, they are estopped from denying that person's authority.
   • Agency by Holding Out: Similar to estoppel, but implies a positive act by the principal leading others to believe in the agent's authority.
   • Agency by Necessity: Arises in emergency situations where an agent acts to protect the principal's interests without prior authority, provided certain conditions are met (e.g., real necessity, impossible to communicate, bona fide action).
3. By Ratification (Section 196): When a person acts as an agent for another without their authority, and the principal subsequently accepts or confirms those acts, it creates an agency retrospectively.
4. By Operation of Law: In certain cases, the law may deem a person to be an agent (e.g., partners in a firm are agents of the firm and other partners).

'Agency by Necessity' is a type of implied agency that arises in emergency situations where a person acts as an agent for another without prior authority, to prevent loss or damage to the principal's property or interests. This is an exception to the general rule that an agent cannot act without authority.

For an agency by necessity to be valid, the following conditions must be met:

1. Real and Imminent Necessity: There must be a genuine and urgent necessity for the agent to act without the principal's express authority. The situation must be such that immediate action is required to preserve the principal's property or interests.
2. Impossible to Communicate: It must be practically impossible for the agent to communicate with the principal to obtain their instructions within the time available to prevent the loss.
3. Agent acted bona fide: The agent must have acted in good faith, honestly believing that their actions were in the best interests of the principal.
4. Action for Principal's Benefit: The act done by the agent must be for the benefit of the principal and not for the agent's personal gain.
5. Reasonable and Prudent Action: The agent must have acted as a person of ordinary prudence would have acted in their own case under similar circumstances. For example, a master of a ship selling perishable cargo that is deteriorating rapidly when communication with the owner is impossible.

The main rights available to an agent against their principal, as per the Indian Contract Act, 1872, are:

1. Right to Remuneration (Section 219): An agent is entitled to receive the agreed remuneration for the performance of the agency business. If no amount is agreed, a reasonable remuneration is payable.
2. Right to Retainer (Section 217): An agent has the right to retain, out of any sums received on account of the principal in the business of the agency, all moneys due to themselves in respect of advances made or expenses properly incurred, and also such remuneration as may be payable to them for acting as agent.
3. Right of Lien (Section 221): An agent has a right to retain goods, papers, and other property, whether movable or immovable, of the principal received by them until the amount due to them for commission, disbursements, and services in respect of the same has been paid or accounted for.
4. Right to Indemnification (Sections 222-223): The principal is bound to indemnify the agent against the consequences of all lawful acts done by the agent in exercise of the authority conferred upon them. This also extends to acts done in good faith, even if they cause injury to third parties.
5. Right to Compensation (Section 225): The principal must make compensation to the agent in respect of injury caused to the agent by the principal's neglect or want of skill.

Generally, an agent is not personally liable for contracts made on behalf of a disclosed principal. However, Section 230 of the Indian Contract Act, 1872, provides exceptions where an agent can be held personally liable:

1. Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad (Foreign Principal): In such cases, the agent is presumed to be personally liable.
2. Where the agent does not disclose the name of their principal (Undisclosed Principal): If the agent does not reveal the identity of the principal, they are personally liable.
3. Where the principal, though disclosed, cannot be sued (e.g., a foreign sovereign, minor, or person of unsound mind): The agent is personally liable as the principal lacks capacity.
4. Where the agent signs a contract in their own name without qualifying their signature: If the agent fails to indicate that they are signing as an agent, they may be held personally liable.
5. Where the agent acts without or exceeds their authority: If the agent acts beyond their actual or apparent authority, they are personally liable to the third party for breach of warranty of authority.
6. Where there is a custom or usage of trade making the agent personally liable: Certain trades have a custom where agents are personally liable.
7. Where the agent expressly agrees to be personally liable: If the agent explicitly undertakes personal liability, they will be bound.