APPOINTMENT AND AUTHORITY OF AGENTS

AGENT AND PRINCIPAL DEFINED

An Agent is a person employed to do any act for
another or to represent another in dealings with third
person. The person for who such act I done, or who is so
represented, is called the Principal.
DIFFERENT KINDS OF AGENTS
Depending on the kind of authority given to the Agent to
act on behalf of the Principal the Agent are of various
kinds.
(1) Auctioneers
An auctioneer is an agent whose business is to sell goods
or other property by public auction. i.e. by open sale. He
is a mercantile agent within the meaning of section 2(9)
of the Sale of Goods Act. The Authority vested in him is
to sell the goods only and not to give warranties on
behalf of the seller, unless expressly authorized in this
behalf. If the owner of the goods puts the agent in
possession of the goods although the authority to sell
has not been conferred on him, a buyer in good faith
from such an auctioneer will get a good title in respect of
the goods. Thus if he has been authorized to sell the
goods only subject to a reserved price but he sells the
same to an innocent and bone fide buyer below the
reserved price, the buyer will get a good title in respect
of such goods.
(2) Factors
A factor is a mercantile agent who is entrusted with the
possession of the goods for the purpose of sale. He has
also the power to sell goods on credit and also to receive
the price from the buyer. If the owner has put a factor in
possession of the goods or the documents of title but
without authorizing him to sell the goods, the sale of
goods by him will convey a good title to a bona fide
buyer. A factor has a right of gene3ral lien over the goods
belonging to his principal, which are in his possession, for
the general balance of account.
(3) Brokers
He is an agent who has the authority to negotiate the
sale or purchase of goods on behalf of his principal, with
a third person. Unlike a factor, he himself has no
possession of the goods. He merely makes the two
parties to enter into a contract. He gets his commission
whenever any transaction materializes through his
efforts.
(4) Del Credere Agents
Generally the function of an agent is over after a contract
is established between his principal and the third party.
He is not answerable for the failure of the third person to
perform the contract. A del credere agent constitutes an
exception to this rule. He is a mercantile agent, who, for
payment of extra commission known as del credere
commission, guarantees the performance of the contract
by the third person. If in such a case the third person, for
instance, fails to pay for the goods supplied to him, the
principal cn bring an action against the del credere for
the same. The liability of the del credere agent, like that
of a surety, is secondary and the same arises if the third
person fails to pay the principal what is due under the
contract.
Some features of a contract of agency
1. The principal should be competent to contract.
2. The agent may not be competent to contract.
 3. No consideration is necessary to create an agency.

HOW AGENCY IS CREATED?

1) By Express or Implied Authority.
A person who is competent to contract has the
power to appoint an agent. He may do so by
expressly authorizing the agent to act on his behalf,
or such an authority may be implied from the
circumstances of the case.
2) By Estoppel
When he agent does not possess actual authority to
act on behalf of the principal, but the principal by his
conduct creates an impression in the mind of a third
person that the agent has power to so act, the
principal is bound because of the doctrine of
estoppel.
3) By Ratification
Even though no authority has been conferred on a
person to act as an agent, the principal could create
an agency with retrospective effect, by according a
subsequent approval to act which has been done on
his behalf.
4) By necessity
In situations of emergency a person may have the
power to act on behalf of another so as to bind the
other. Such a power is presumed to be there when
the agent does have time to communicate with the
principal and the act by him is done in order to
protect the property of his principal. He may, under
such circumstances do acts for which normally he
does not have any authority.
5) By Husband wife Relationship
A married woman cohabiting with her husband is
presumed to have the power to pledge the credit of
her husband for necessities. This authority is
presumed to be there when the husband and wife
are cohabiting. If they are living separately there is
presumed to be no such authority in wife to pledge
the credit of her husband. It Is further necessary
that the husband and wife must be living in a
domestic establishment. If the husband and wife are
living in a hotel, where they have been working as
manager an manageress respectively, i.e., when the
two are not living in a domestic establishment, the
 husband cannot be made liable for the purchases
made by wife. (Debenham v Mellon) 1880
If the third person gives credit to the wife only, or
when the husband revokes the authority by giving a
notice to a third person, he is not bound by wifes
acts.
When a man and woman are living together and
they appear to be husband and wife to a third
person, the women will be able to bind the man in
the same way as if she was his wife.

DUTIES OF AGENTS
1. Duty to follow principals direction
According to section 211 an agent has a duty to
follow the directions given to him by the principal. As
stated in this section:
i. Ag agent is bound to conduct the business of his
principal according to the directions given by the
principal or,
 ii. If there are no such directions, the agent should
the business according to the customs which
prevails in doing business of the same kind at the
place where the agent conducts such business.
When the agent does not act as stated above, if any loss
is sustained by the principal, he must make it good to his
principal, and if any profit accrues, he must account for
it.
Illustrations
a) A, an agent engaged in carrying on for B a business,
in which a custom to invest from time to time, at
interest, the money which may be in hand, omits to
make such investment. A must make good to B the
interest usually obtained by such investments.
b) B, a broker, in whose business it is not the custom
to sell on credit, sells goods of A on credit to C,
whose credit at the time was very high. C, before
payment, becomes insolvent. B must make the loss
to A.
It is clear from illustration (b) above that when the agent
does not act according to the principals directions or the
custom, as the case may be, he will be liable for the loss
caused to the principal even though the same could not
have been anticipated at the time of doing the act.
2. Duty to show proper skill and care
The agent is supposed to take due care and act with
reasonable diligence in the matter of agency. Section 212
makes the following provisions in this regard.
Skill and diligence required from agent An agent is
bound to conduct the business of the agency with as
much skill as is generally possessed by persons engaged
in similar business unless the principal has notice of want
of skill. The agent is always bound to act with reasonable
diligence, and to use such skill as he possess; and to
make compensation to his principal, in respect of the
direct consequences of his neglect, want od skill, or
misconduct but not in respect of loss or damage which
are indirectly or remotely caused by such neglect; want
of skill or misconduct.
This provision has been explained by the following
illustrations/-
(a) A, a merchant in Calcutta has an agent, B, in London,
to whom a sum of money is paid on As account, with
orders to remit. B retains THE MONEY FOR A
CONSIDERABLE TIME. A, in consequences of not receiving
the money is liable for the money and interest from the
date on which it ought to have been paid, according to
the usual rate, and for any further loss . as, e.g., by
variation of rate of exchange ----- but not further.
(b) A, an agent for the sale of goods, having authority to
sell on credit, sells to B on credit, without making the
proper and usual enquiries as to the solvency of B. B, at
the time of such sale, is insolvent. A must make
compensation to his principal in respect of any loss
thereby sustained.
3. Duty not to delegate his duties
As a general rule an agent is supposed to perform his
duties himself personally, and he has no right to
delegate his duties to another person. This rule is
contained in the maxim Delegatus non potest delegate
which means that an agent to whom some authority has
been delegated cannot further delegate that authority to
another person. The relationship os principal and agent is
based on confidence and trust. When the principal has
reposed trust in a particular agent, the agent cannot
replace another person in his place. In other words an
agent cannot employ a sub-agent to get the work done
entrusted to him. An agent,to get work entrusted to him.
An agent, who has undertaken to do work personally,
cannot employ a sub-agent to do the same. This rule is
subject to exceptions. Section 190. An agent can
however, employ a sub-agent in the following
exceptional cases.
i. When there is a custom of trade to that effect, the
agent may employ a sub-agent, and
ii. When the nature of agency so requires, an agent
must employ a sub-agent. For instance, an agent
authorized to recover some amount from a third
person by filing a suit may engage a lawyer for the
purchase, or when an agent has been authorized to
purchase or sell goods in foreign country, he may
engage a sub-agent for doing the work.
iii. When an act does not require a personal skill, the
same may be gotr done through a sub-agent. The
rule against delegation is only for such acts, which
 an agent has undertaken to perform personally. If
the undertaking is of a purely ministerial nature,
where an agent has not undertaken to perform the
same personally, a sub-agent may be appointed to
do the work. For example if an agent has been
appointed to weigh coal lying at a place, or to
transport goods
from one place to another, he may get the work
done from a sub-agent.
iv. when the principal, expressly or impliedly, agrees
to the appointment of a sub-agent for doing certain
work, which has been otherwise assigned to the agent, a
sub-agent may be validly appointed.
4. Duty to render proper accounts
Another duty of the agent is to render proper accounts
to his principal on demand. This means that he should
maintain proper accounts of the sums belonging to the
principal which are in his hands, he should not mis-utilise
and mis-appropriate them, and on demand from the
principal he should submit true accounts to his principal.
5. Duty to pay sums received for principal
Another duty of the agent is to pay to his principal all
sums received on principals account. Before making
such payments to his principal the agent is, however,
entitled to make such deductions out of the same as are
lawfully due to him. According to section 217, an agent
may retain, out of any sums received on account of the
principal in the business of the agency, all moneys due to
himself in respect of advances made or expenses
properly incurred by him in conducting such business and
also such remuneration as may be payable to him for
acting as agent.
6. Duty not to deal on his own account
An agent is under a duty not to deal on his own account
in the business of agency, unless the principal consents
thereto. If in any transaction an agent deals on his own
account without the principals prior consent the
principal has the following two rights:
1) To repudiate the transaction, by showing either:
a. That any material fact has been dishonestly
concealed from him by the
b. That the dealings of the agent have been
disadvantages to him (Section 215)
Illustration
A directs B to sell As estate. B buys the estate
himself in the name of C. A , on discovering that B
has bought the estate for himself, may repudiate the
sale, if he can show that B has dishonestly concealed
any material facts, or that the sale has been
disadvantageous to him.
AQ directs B to sell As estate. B, on looking over the
estate before selling it, finds a mine which is
unknown to A. B informs A that he wishes to buy the
estate for himself, but, conceals the discovery of the
mine. A allows B to buy in ignorance of the existence
of the mine. A, on discovering that B knew of the
mine at the time he bought the estate, may either
repudiate or adopt the sale at his option.
2) To claim from the agent any benefit which may have
resulted to him from the transaction. (Section 216)
Illustration
A directs b, his agent, to buy a certain house for him.
B tells A it cannot be bought, and buys the house for
himself. A may, on discovering that B has bought the
 house compel him to sell it to A at the price he gave
for it.
7. Duty to communicate with principal
According to section 214, it is the duty of the an agent, in
cases of difficulty to use all reasonable diligence in
communicating with his principal, and to seeking to
obtain his instructions.
RIGHT OF AGENTS AND DUTIES OF PRINCIPAL
1. Right to Remuneration
Section 219 contains provisions regarding agents
right to remuneration. This section states that in
the absence of any special contract, payment for the
performance of any act is not due to the agent until
the completion of such act, but an agent may detain
moneys received by him on account of goods sold,
although the whole of the goods consigned to him
for sale may not have been sold, or although the sale
may not be actually complete.
2. Right to Retain sums
The agent has a duty to pay to his principal all sums
received on principals account. But he has also a
 right to retain, out of any sums received on account
of the principal in the business of the agency, all
money due to himself in respect of advances made
or expenses properly incurred by him in conducting
such business and also such remuneration as may be
payable to him for acting as agent.
3. Right of Lien on Principals Property
According to section 221, in the absence of any
contract to the contrary, an agent is entitled to
retain goods, papers and other property whether
movable or immovable, of the principal received by
him, until the amount due to himself for
commission, disbursement and service in respect of
the same has been paid, or accounted for to him.
4. Right to be identified
According to section 222, the employer of an agent
is bound to indemnify him against the consequences
of all lawful acts done by such agent in exercise of
the authority conferred upon him.
Illustrations
B, at Singapore, under instructions from C of
Calcutta, contracts with C to deliver certain goods to
him. A does not send the goods to B, and C sues B
 for breach of contract. B informs A of the suit and
authorizes him to defend the suit. B defends the suit,
and is compelled to pay damages and costs and
incurs expenses. A is liable to B for such damages,
costs and expenses.
Apart from the right of indemnity against the
consequences of all lawful acts done by the agent,
the agent is also entitled to indemnity against
consequences of acts done in good faith, even
though the act causes an injury to the rights of third
person for example, it is a tort. Section 223 contains
the following provisions in this regard.
5. Right to Compensation for damages due to
Principals Neglect
According to section 225, the principal must make
compensation to his agent in respect of injury
caused to such agent bt the neglect or want of skill.
For example, A employs B as a bricklayer in building
a house and puts up the scaffolding himself. The
scaffolding is unskillfully put up, and B is in
consequences hurt. A must make compensation to
B.
 TERMINATION OF AGENCY
Section 201 mentions various modes of termination of
agency of an agent.
Section 201 Termination of agency -- An agency is
terminated by the principal revoking his Authority ; or by
the agent renouncing the business of the agency ; or by
the business of the agency being completed ; or by either
the principal or agent dying or becoming of unsound
mind ; or by the principal being adjudicated an insolent
under the provisions of any Act for the time being in
force for the relief of insolvent debtors.
(i) By revocation of authority
It has been noted that one of the modes of termination
of agency is the revocation of authority by the principal.
The revocation of the authority can be made by the
principal subject to the following rules.
A. Revocation may be express or implied
According to section 207, revocation of agency may
be either express or implied in the conduct of of the
principal. For example, A empowers B to let As
house. Afterwards A lets it himself. This is implied
revocation of Bs authority.