INTRODUCTION TO THE LAW OF AGENCY

1. INTRODUCTION

Law of agency is governed by Part X of the Contracts Act 1950. An Agent is defined as a person employed to do any act for another or to represent another in dealings with third persons (sec 135 CA). The person for whom such act is done, or who is so represented is called the Principal.

Therefore agency is the relationship which subsists between the principal and agent. Thus, in agency,  exists TWO contracts:

·         1^st – contract made between the principal and the agent from which the agent derives his authority to act for and on behalf of the principal

·         2^nd – made between the principal and the third party through the work of the agent

TYPES OF AGENCY

Types according to authority:

1. Universal

A universal agent is a general agent with extensive powers. He can do all acts which a principal may personally do. This kind of agency though seldom made is created by deed in the form of Power of Attorney. A principal rarely grants such extensive powers to an agent unless there are compelling reasons.

2. General

A general agent is an agent who is employed to act on behalf of his principal, generally, in transactions relating to a particular trade or business. A third party, dealing with a general agent, can assume that the agent has power to do all that is usual in the ordinary course of his business or trade. He is not affected by any limitations on the agent’s usual authority unless, he is aware of those limitations.

3. Special

A special agent is an agent appointed to do a specific act for a specific purpose  and his authority is limited to that act or purpose.

Types according to function:

1. Broker

A broker is a commercial agent who is employed to make contracts between his principal and third parties for a commission called a brokerage. He is different from a factor, in that, he is not enthrusted with the possession of the goods and cannot contract in his own name. his job is to find purchasers for those who wish to sell and sellers for those who wish to buy, and to negotiate and make contracts. Once a contract between the principal and the third party is made, he receives his commission and is no longer concerned with it. A broker has no lien on the goods as he has no possession of them.

2. Factors

A factor is commercial agent, who in the ordinary course of his business, is entrusted with the goods of his principal for sale. He usually sales the goods in his own name and without disclosing of his principal. He has a lien over the goods in his possession, as commission.

The fact that the agent is under a restriction to sell at a certain price or he is bound to disclosed the name of the principal does not disqualify him from being a factor, provided he is in possession of the goods to be sold.

3. Auctioners

An auctioner is an agent who is employed to sell goods by auction. He starts off as an agent for a seller but when he accepts a bid from a buyer, he becomes an agent for the buyer also.

4. Del Credere

A Del Credere is an agent, who in consideration of extra commission undertakes that the third party, with whom he enters into a contract on his principal behalf, will perform his obligations. If the third party fails to perform the obligations of the contract, the del credere agent will be liable for it.

PRINCIPAL

Who can be a principal?

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 (sec 136).

As between the principal and third persons, any person may become an agent, but persons of unsound mind and who are below 18 years of age are not liable towards their principal for acts done by them as agents

E.g. if A employs B (a minor) to buy some goods from C on his behalf and C supplies the goods, A cannot allege that he is not liable to pay for the goods just because B is not at the age of majority. A is still liable to pay C for the goods.