Rights and duties of an agent



In India, Section 182 of the Contract Act, 1872, describes “Agent is an individual employed to deal with third parties to do any act for another.” A commercial law agent (also known as a manager) is a person who is allowed to work on behalf of another person (known as the principal or client) in order to develop a legal relationship with a third party. The principal must primarily conduct his or her own part of the agency in two ways. The agent is allowed to negotiate a contract between the principal and a third party. An agent can be sued for his personal liabilities, and an agent’s authority can be revoked.


Following are kind of agent.

1. Del-credere agent

A del-credere agent is an agent who guarantees that the person to whom he sells will pay for that to his principal, he will be responsible if he does not pay. This is a type of mercantile agent.

2. Factor

An agent to whom products are entrusted for sale is a factor.

3. Mercantile agent

The person who has the authority to sell goods or to buy goods or to collect money for the security of goods is a mercantile agent.

4. Banker

The relationship between banker and his client is that of debtor and creditor.

5. Auctioneer

An auctioneer is an agent who, at a public sale for commission, is authorized to sell products to the highest bidder.

6. Sub-agent

A sub-agent is a person employed by and acting under the supervision of the original agent in the agency’s business.

7. Broker

A broker is an agent employed for the buying or sale of products or other properties.

8. Indenter

He is an agent who buys or sells on his principal’s behalf.

9. Advocate

An advocate also acts an agent. He appears on behalf of principal in the court.

10. Co-agent

Who acts jointly is called co-agent.


1) Right to Receive Remuneration

An agent is entitled to remuneration under Section 219 of the Indian Contract Act. However, Section 220 of the said Act states that an agent who is guilty of wrongdoing in the Agency’s business is not entitled to any remuneration in respect of that aspect of the business that he has done wrong.

2) Right of Lien ( Section 221 )

In the absence of any contract to the contrary, the agent shall be entitled to retain the goods, documents and other property, whether movable or immovable, of the principal received by him until he has been paid or accounted for the sum due to himself for commission, disbursements and services in respect of the same.

3) Right to Indemnity

The agent must be indemnified against consequences of lawful actions. Indemnity means promising to make good the loss.  According to Section 222 of the Indian Contract Act, 1872, “The employer of an agent is obliged to indemnify him in the exercise of the authority conferred on him against the consequences of all legal acts performed by that agent.”

4) Right to compensation

Under section 225 of the Indian Contract Act, 1872 an agent is entitled to claim compensation for injuries sustained as a consequence. Section 225 states as follows: “The principal must compensate his agent for the injury caused to that agent by the principal’s neglect or lack of ability to do so.”


1) Agent’s duty in conducting principal’s business (Section 211)

An agent is obliged to conduct the business of his principal in accordance with the instructions provided by the principal or in the absence of any such instructions, in accordance with the custom existing at the place where the agent conducts that business. If the agent acts otherwise if any loss is caused, he must make it good for his principal and if any profit accrues, he must pay for it.

2) Skill and diligence required from agent (Section 212)

An agent is bound to perform the agency’s business with as much ability as is normally exhibited by individuals engaged in similar business, unless the principal is aware of his lack of ability. The agent is always obliged to behave with due caution and to use the expertise he possesses and to compensate the principal for the direct effects of his own negligence, lack of ability or misconduct, but not for failure or harm caused indirectly or remotely.

In Jayabharthi Corp v. Sv P.N. Rajasekhara Nadar it was held that “Section 212 addresses another part, which states that it is the responsibility of an agent to use all due caution to communicate with the principal in circumstances of difficulty and to do his best to seek his orders. He is responsible to the principal in all such cases where the agent misinforms the principal and a loss arises due to his misconduct.”

3) Duty to render proper accounts (Section 213)

An agent is required, in compliance with Section 213 of the Indian Contract Act 1872, to provide his principal with proper accounts on demand.

4) Duty to communicate with principal (Section 214)

In cases of difficulty, it is the responsibility of an agent to use all fair caution in communicating with his principal and in trying to receive his instructions.

5) Not to deal on his own Account (Section 215)

Section 215 of the Indian Contract Act 1872 deals with the principal’s right when the agent deals, on his own account, with the agency’s business without the permission of the principal. If an agent deals in the agency’s business on his own account without first obtaining his principal’s consent and acquainting him with all material circumstances that have come to his own knowledge of the subject, the principal may repudiate the transaction if the case shows either that any material fact has been dishonestly concealed from him by the agent or the dealings have been disadvantageous to him.

6) Not to make Secret Profits (Section 216)

Section 216 of the Indian Contract Act deals with the right of the principal to profit obtained by the agent dealing in the agency’s business on his own account. Without the knowledge of his principal, an agent could not deal on his own in the agency business to make secret profits.

7) Duty to pay sums received for principal (Section 218)

An agent is obliged to pay to his principal all amounts earned on his account accordance with Section 218 of the Indian Contracts Act, 1872.

8) Not to Disclose Secret

It is an agent’s responsibility to keep the agency’s business secret and to not disclose sensitive matters.

In Pannalal Jankidas v Mohanlal, the Supreme Court held that where the agent who was asked by the principal to get the goods insured and actually charged the principal’s premium but never got the insurance, the agent was held liable to compensate the principal when the goods were lost in an explosion.”

In John v. Philip it is held that “an estate agent cannot make a contract with a third party that would be binding upon his principal.”

In Yasuda Fire and Marine Insurance Co. v. Orion Marine Insurance Underwriting Agency Ltd. It was held that the duty to have a correct account in the fullest sense derives from the fact that the agent has been entrusted with the power to bind the principal to transactions with third parties and that the principal is entitled to know what his personal contractual rights and responsibilities are in relation to those third parties and what he is entitled to obtain by way of transactions with third parties.

In Liley v.Doubleday: An agent was instructed to warehouse his principal’s goods at a particular place. He placed a part of them in a different warehouse that was equally safe. But the goods were destroyed without negligence. The agent was held liable for the loss. The agent is completely responsible for the loss because of any disobedience or deviation from the instructions.


The formation of a contract signed by mutual agreement between a principal and an agent is an agency. By agency, the principal grants an agent the power to act on behalf of and under the direction of the principal. The relationship between an agent and a principal is fiduciary, and the actions of an agent bind the principal. When acting without actual authority, but with apparent authority, an agent is liable to a principal.

Author: Ishita Agrawal,
B.A.LL.B. 3rd year, Himachal Pradesh National Law University Shimla

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