Agency: principal and agent.


An Agent is characterized as a connection between two gatherings called PRINCIPAL and AGENT, whereby, the agent can make an agreement(s) between the principal and third party (or to go about as the delegate of the principal in different manners).

Agency is the relationship that remains alive between the principal and the agent, who has been approved to represent him or speak to him in managing others. In this way, in an organization, there is as a result of two agreements for example:

  1. a) Made between the principal and the Agent from which the agent determines his position to represent and for the benefit of the principal; and 
  2. b) Made between the principal and the third party through crafted by the agent. 

Formation of Agency 

By express arrangement by the principal 

For the most part, an authority is presented by the Principal to the Agent. On the off chance that the agent surpasses this position, at that point, the principal won’t be bound, and the Agent will be by and by subject to the third party for penetrating of guarantee of power. 

Anyway, the customary law may broaden the extent of the agent’s power past this, to secure a guiltless third party. 

The principal will at that point be bound to the third party, yet the principal can sue the agent for violating his real power if it’s a break of the agency contract. 

By implied arrangement by the principal 

The law can induce the formation of an organization by suggestion when an individual by his words or lead goes about as though he has such power and the principal recognizes that he was qualified for act likewise. Implied authority, isn’t explicitly referenced by contract yet accepted or suggested by the idea of the relationship, are dared to be given to an Agent if that authority is important to play out the obligations or duties in any case appointed to the agent or agent. 

For instance, where one individual permit someone else to arrange products for his sake and routinely pays for them, an agency might be implied. In such a case, he will be limited by the agreements as though he has explicitly approved them. 

Case law: Chan Yin Tee v William Jacks and Co. 

Evident/Ostensible position 

While genuine authority emerges from an understanding, clear authority is what the law views the agent as having, even though the principal might not have assented to the Agent having such a position. Evident authority can occur in two circumstances: 

  1. a) Where principal by words/direct, makes the third party accept that ‘agent’ has the position to make a contract for the principal 
  2. b) Where the agent recently had the position to act, however, that authority was ended by the principal and the principal didn’t advise the third party’s that he has ended it 

By necessity

The sources of the tenet of necessitous mediation by somebody who is in a legitimate relationship with the litigant lie in the rule of organization of need, where an agent went past their power by interceding in the interest of the principal in a crisis. Due to the conditions of need, especially the impracticability of the Agent speaking with the principal, the courts were set up to regard the agent just as the person had the vital position to do what was sensibly important to spare the key’s property.

On the off chance that an agency of need was built up, the Agent would be repaid for the cost acquired in safeguarding the vitals’ property. An agency of need might be made if the accompanying three conditions are met: 

  1. a) It is unthinkable for the agent to get the key’s guidance. 
  2. b) The agent’s activity is vital, in the conditions, to forestall misfortune to the principal to keep them from rotting. 
  3. c) The agent is more likely than not to act in compliance with common decency. 

In a pressing circumstance, an agent has the power to act in the wellbeing to shield his principal from misfortunes. 

Case law: Great Northern Railway Co v Swaffield 

Realities: Swaffield orchestrated a pony to be moved to himself care of a railroad station possessed by the offended parties. The pony showed up at the station anyway Swaffield was not there to meet it. As the offended parties couldn’t contact Swaffield before dusk and had no offices to oblige the pony, they sent it to an attire stable. 

Issue: Could the offended parties recuperate from Swaffield the sum they paid the stable for the pony’s convenience? 

Held: The offended parties had acted sensibly in putting the pony in the stable and were qualified to recoup the costs (which were sensible) from Swaffield. 

By Estoppel 

An individual can’t be limited by an agreement made for his sake without his position. In any case, on the off chance that he by his words and direct permits a third party to accept that that specific individual is his agent in any event when he isn’t, and the third party depends on it to the burden of the third party, he (principal) will be stopped or blocked from precluding the presence from securing that individual’s position to follow up for his sake. 

Endorsement by the Principal 

Agency by approval can emerge in any of the accompanying circumstances: 

  • An agent who was appropriately named has surpassed his power; or 
  • An individual who has no position to act went about as though he has the power. 
  • At the point when one of the above said circumstances emerge, the principal can either dismiss the agreement or acknowledge the agreement so made. 

At the point when the principal acknowledges and affirms such an agreement, the acknowledgment is called approval. Confirmation might be communicated or suggested. 

The impact of endorsement is to render the agreement as authoritative on the principal as though the Agent had been appropriately approved beforehand. 


Duties of an Agent to his Principal 

The obligation of an agent is list down from Section 164 to Section 178 of the Contract Act 1872. 

  • To comply with the principal’s guidance 
  • To practice care and persistence in completing his work and utilize such aptitude as he has.
  • To render appropriate records when required 
  • To pay to his principal all aggregate got for howdy benefit 
  • Not to let his advantage struggle mind his obligation 
  • Not to make a mystery benefit out of the presentation of his obligation 
  • Not to uncover private data or archives 
  • Not to assign his position 


Duties of Principal towards His Agent 

The obligations of a principal to his Agent are given From Section 175 to Section 178 of the Indian Contract Act, 1872. The principle obligations are 

  • To pay the Agent the commission or other concurred compensation except if the organization’s relationship is unwarranted. 
  • Not to determinedly forestall or block the Agent from acquiring his bonus. 
  • To repay and repay the agent for acts done in the activity of his obligations. 

Termination of Agency 

Sections 154 to Section 163 of the Indian Contracts Acts, 1872 states the various ways an agent authority may be terminated. 

  1. a) By the act of the party 
  2. b) By common assent (both gatherings concur) 
  3. c) By repudiation by Principal 
  4. d) By renunciation by Agent 

All the above should be possible by pulling out (sensible notification on account of renouncement and renunciation) 

  1. e) By the exhibition of the agreement of the organization. This happens when an organization is made for a single explicit exchange. (Section 154 of Indian Contract Act, 1872) 
  2. f) By the lapse of the period fixed/inferred in the agreement 

By operation of law 

By the death of either principal or agent. Since the connection between principal and agent is private and individual (Section 161). Section 162 of the Indian Contract Act states when the principal dies, the agent must find a way to ensure and save the interests dependent on him. 

By the ensuing madness of either principal or agent. An individual of an unsound mind can’t go into an agreement to select an agent or to go about as an Agent. 

By the bankruptcy/insolvency of principal. 

By the occurrence of an occasion which renders the agency unlawful. This is a utilization of the tenet of disappointment to contracts. For agency contracts, there are instances of the end when the principal turns into an adversary third party due to war or where the topic is lost/obliterated. 

Case Law: Stevenson v. Aktiengesellschaft Fur Cartonnagen Industries 

At the point when an organization is ended, the A agent can’t bind the principal in transactions that he may host went into with third. He will be personally obligated to a third party for the contract.


Author: mayank choudhary,
Jagran lakecity university.

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