This article is written by Simran nigam, (3 year 5th semester) shri jai narayan pg college Lucknow.
INTRODUCTION
A contract of agency is a legal relationship where one person or party is represented as a principal and another person or party as an Agent, which says that an agent is a person employed to do any act for another or to represent another to deal with third person. So this contract is applied in various Business and legal contexts. So it is important to know the law relating to contract of agency because nearly all business transactions worldwide are carried out through agency. All corporations, big or small, carry their work out through agency. It also allows the principle to delegate the task and responsibility and the Agent to act as intermediaries. Agent may be employed to represent a client in Negotiations and other dealings.
- Key words:
- Principal – only tells the agent what is to be done but not tells how is to be done.
- Agent – At a certain time can work for others
- Duties & Responsibilities – Obligations of both the Principal & Agent.
- Term & Termination: -Time & Duration of the agreement and Norms & condition for termination.
- Compensation – it specifies the amount, method and date of payment to the consultant.
- Employer & Employee – Employer & Employee – Employer controls the activity of the Employee of what is to be done and how is to be done.
Introduction:
A Contract of Agency is defined under section-182 of the Indian Contract Act that creates a legal relationship between the principal and agent. The person who represents is known as ‘Principal’ and the other person who represents as an employee is known as ‘Agent’ so it defines where the person has the authority to act on behalf of another person (Him / Her) in a legal relationship with the third party.
Contract of Agency is not just a Bridge between the Principle and the Third party, but he can also make the principal answerable for the acts performed by him. And the agent is acting for the principle that he works according to the Capacity of the Principal. Agency can be expressed or implied.
Case law 1- Jainam Cables (India) Private Limited vs Union of India on 23 December, 2019.
Case law 2 – sheik farid bakhsh v. Hargulal singh
Allahabad high court ruled that the principal must pay the agent’s remuneration as soon as the agent has substantially completed the tasks contracted to them.
Case law 3 – Laxmidas morarji v. Dharamsi Haji
The Bombay high court ruled that when a person entrusts another person with their goods for sale, there is an implied authority to do all that is necessary to sell the goods.
Case law 4 – The Indian Hume Pipe Co. Ltd. vs State Of U.P.
And 7 Others on 6 November, 2019
that in the matter of award of contracts the Government and its agencies have to act reasonably and fairly at all points of time … Management Studies and Air India Ltd. v. Cochin International Airport Ltd. (2000) 1 SCR 505).” 14. Further reliance has been placed in case
Case law 5 – Dcit, Circle-7(1), New Delhi vs Dlf Urban Pvt Ltd, Delhi on 8 April, 2024
Why this act has been made
Contract of agency is made to establish a formal relationship between the principal and agent, in which one party agent is authorized to act on behalf of another person or party in business transactions or other legal matters. Such as : Delegation of task , accountability & performance evaluation of the agent on behalf of the principal , legal authority as to making decisions and entering into the contract and also ensuring that it should be legally binding while action has to be taken by the principal , if any loss has to be faced or recovered by the company .
- Principal – only tells the agent what is to be done but not tells how is to be done.
- Principal can be a Major person with a sound mind & Minor cannot be a principal.
- Agent – At a certain time can work for others
- Agent can be a major person with a sound mind & even a minor person can act as an agent.
- Employer & Employee – Employer controls the activity of the Employee of what is to be done and how is to be done.
Creation of Agency
- Agreement – Agency can be created by an agreement between Principal and Agent and its can be express or implied. Express agreement can either be verbal or written.
- Necessity – In certain circumstances, law confers the authority on the person to act as an agent for the benefit of the other. If an agent exceeds his authority during an emergency, in the interest of the principal, then his / her act is to be considered to be valid.
- Ratification – if any person does any act, without the knowledge or authority of any other person and that person elects to accept, then it shall be treated as Agency by ratification.
- Estoppel – if any person represents others in such a way to the third party that third party is under the impression that the person held out is the agent.
Case study
- Duties and responsibilities
a. Agent – The duties and responsibilities of an agent is to find, negotiate contracts, sign talent, loyalty, care and to get the best deals for their clients. They also manage their client’s careers such as planning, executing promotional campaigns.
B. Principal- The duties and responsibilities of a principal are the expectation of performance, access to information, the ability to terminate the relationship and seeking damages for breaches of duty.
- Termination of agency
It is defined under section 201 of Indian contract act which means putting an end to the legal relationship between principal and agent.
- Right & liabilities
According to the (section 212) say that the required agent has to act with reasonable diligence and skills and to compensate the principal for the direct consequences of their own neglect, misconduct or lack of skill. They are not responsible for indirect and for any remote losses.
