Agency Part I
Section 182. Agent and Principal.
Agent:
A person hired or authorized to act on behalf of someone else.
An Agent can perform acts or conduct dealings with third parties in the name or interest of that other person.
Principal:
The person for whom the agent acts or represents.
The Principal is the beneficiary of the agent’s actions.
The relationship allows the agent’s acts to legally bind the principal if done within the scope of authority.
Example:
A shop owner (principal) appoints B (agent) to purchase goods from a supplier.
B negotiates and buys the goods on behalf of the owner.
B is the agent, the shop owner is the principal.
Section 183. Who may employ agent.
Who can employ an agent:
The person must be legally an adult according to the law applicable to them.
The person must have the mental capacity to understand and make decisions.
Only an adult of sound mind can appoint someone (an agent) to act on their behalf.
Minors or persons of unsound mind cannot legally employ an agent because they are not competent to contract.
Competence to employ an agent is the same as the general legal capacity to contract.
Section 184. Who may be an agent.
With respect to dealings with third parties, almost anyone can act as an agent.
Only a person of majority age and of sound mind can be held responsible to the principal for their actions as an agent under the law.
A minor or someone of unsound mind can act as an agent, but they cannot be legally responsible to the principal for the acts done as an agent.
Responsibility and accountability as an agent require legal capacity.
Therefore, Acting as an agent and Being legally responsible as an agent are distinct.
Legal responsibility requires majority and sound mind.
Section 185. Consideration not necessary.
Unlike most contracts, an agency can be created even without any payment or benefit (consideration) from the principal to the agent.
The agent may act voluntarily, without receiving anything in return.
So , An agency relationship can exist gratuitously (free of charge).
The agent may still have duties and obligations toward the principal even if not paid.
Section 186. Agent’s authority may be expressed or implied.
Agent’s authority may be expressed or implied:
(a). Express authority:
The principal directly tells the agent what they are authorized to do.
It can either be written or oral.
(b) Implied authority:
The authority is not directly stated, but inferred from the circumstances, nature of the agency, or the agent’s position.
Both expressed and implied authority bind the principal in dealings with third parties within the scope of the agent’s authority.
Section 187. Definitions of express and implied authority.
Express Authority:
Authority is express when it is given clearly by words, either spoken or written.
Implied Authority
Authority is implied when it is inferred from the circumstances or the ordinary course of dealings.
Even if not directly spoken or written, the agent may have authority necessary to carry out the duties assigned.
Illustration:
(a).
A owns a shop in Serampore but lives in Calcutta and visits occasionally.
B manages the shop and regularly orders goods from C in A’s name and pays for them from A’s funds with A’s knowledge.
Here, B has implied authority to order goods for the shop, because it is necessary to manage the shop effectively.
Section 188. Extent of agent’s authority.
Extent of agent’s authority:
If an agent has authority to perform a particular act, the agent also has the authority to do all lawful things necessary to carry out that act.
So , essentially the agent can take all reasonable steps required to accomplish the task they were appointed for.
If the agent is authorized to carry on a business, they also have authority to do everything lawful and usual for conducting that business.
An agent’s authority extends not just to the specific act assigned, but also to everything lawfully necessary to achieve that act or manage the business efficiently.
Illustrations:
(a) Debt recovery:
A is employed by B (living in London) to recover a debt in Bombay.
A can take all necessary legal steps to recover the debt and can give a valid receipt/discharge for it.
(b) Business management:
A appoints B as his agent to carry on his ship-building business.
B may buy timber, hire workmen, and do all acts necessary to run the business effectively.
Section 189. Agent’s authority in an emergency.
An agent has the authority to act in emergencies to protect the principal from loss.
The agent’s actions are judged based on what a person of ordinary prudence would do in similar circumstances for themselves.
The authority is limited to emergencies.
The acts must be necessary to prevent loss to the principal.
The agent does not need prior instructions from the principal in such cases.
Illustrations:
(a) Repair of goods:
An agent responsible for selling goods may have the goods repaired if it is necessary to prevent loss.
(b) Sale of provisions to avoid spoilage:
A consigns provisions to B to send to C.
If the goods cannot survive the journey without spoiling, B may sell them locally at Calcutta to prevent loss.
Section 190. When agent cannot delegate.
An agent cannot delegate when:
An agent is generally expected to perform acts personally if the act is part of his authority.
The agent cannot lawfully appoint another person (sub-agent) to perform these acts unless certain exceptions apply.
Exceptions:
Ordinary trade/custom: If it is usual in that trade for a sub-agent to be employed, delegation is allowed.
Nature of the agency: If the type of work requires it (for example, large-scale tasks where delegation is necessary), the agent may employ a sub-agent.
Delegation is not automatic; the agent is bound to perform personally unless the law or trade practices allow otherwise.
Example:
A is appointed to deliver a special handcrafted item to B.
Since the item requires A’s personal skill, A cannot delegate the task to someone else.
On the other hand, if A’s job is to collect payments from 100 customers, and it is customary to employ collectors, A may delegate to sub-agents.
Section 191. Sub-agent.
A sub-agent is a person who is employed by the original agent (not directly by the principal).
The sub-agent acts under the control of the original agent, carrying out tasks related to the agency.
The sub-agent helps the original agent to perform the agency functions, but the original agent remains responsible to the principal for the sub-agent’s actions (Unless the principal has expressly authorized the sub-agent).
A sub-agent is not directly appointed by the principal and their authority comes through the original agent.
Section 192. Representation of principal by sub-agent properly appointed.
Agent’s responsibility for sub-agent.
Sub-agent’s responsibility.
Principal’s representation:
When a sub-agent is properly appointed, the principal is considered to be represented by the sub-agent in dealings with third parties.
The principal is bound by and responsible for the acts of the sub-agent as if the sub-agent were originally appointed by the principal.
Agent’s responsibility:
The original agent remains responsible to the principal for the acts of the sub-agent.
If the sub-agent commits errors or negligence, the principal can hold the original agent accountable.
Sub-Agent’s responsibility:
The sub-agent is responsible to the agent for their acts.
The sub-agent is not directly responsible to the principal, except in cases of fraud or will-ful wrongdoing.
Proper appointment is essential for the principal to be bound.
Original agent’s accountability to the principal is continuous.
Sub-agent’s liability to principal arises only in cases of fraud or will-ful misconduct.
Illustration:
A is an agent of B to manage B’s business. A hires C as a sub-agent to collect debts.
C collects debts from customers. B (the principal) is bound by C’s actions.
If C acts negligently, A is responsible to B.
If C commits fraud, both A and C can be held responsible to B.
Section 193. Agent’s responsibility for sub-agent appointed without authority.
Sub-agent appointed without authority:
If an agent appoints a sub-agent without having authority from the principal, the sub-agent is not properly representing the principal.
The principal is not bound by the acts of this sub-agent and cannot be held responsible for them.
Agent’s liability:
The original agent acts as a principal in relation to the sub-agent.
The agent is responsible for the acts of the sub-agent both to the principal and to third parties.
Sub-agent’s liability:
The sub-agent is not responsible to the principal at all.
The sub-agent is accountable only to the agent who appointed them.
Only a properly authorized sub-agent can bind the principal. Unauthorized sub-agents make the original agent fully liable, not the principal.
Illustration:
B appoints A as his agent. A, without B’s permission, appoints C as a sub-agent to sell goods.
C sells goods to a third party. B (the principal) is not bound by C’s actions.
A is liable to B for C’s acts and also liable to third parties if C causes loss.
C is liable only to A, not to B.
Section 194. Relation between principal and person duly appointed by agent to act in business of agency.
If an agent has the authority (express or implied) to appoint someone, the person appointed is not a sub-agent.
That person becomes a direct agent of the principal for the specific part of the business assigned.
A sub-agent, in contrast, acts under the original agent and represents the principal only through that agent.
A properly appointed agent by an authorized agent represents the principal directly for the part of the business they are entrusted with.
Such appointed agents act for the principal, not merely through the original agent.
Illustrations:
(a)
A instructs B (solicitor) to sell A’s estate and authorizes B to appoint an auctioneer.
B appoints C (auctioneer) to conduct the sale.
C is A’s agent, not a sub-agent, for conducting the sale.
(b)
A authorizes B (Merchant) to recover money from C & Co.
B instructs D (Solicitor) to take legal action.
D is directly A’s agent for the purpose of legal proceedings, not a sub-agent.
Section 195. Agent’s duty in naming such person.
When an agent appoints someone to act for the principal, the agent must use the same care and discretion that a prudent person would use for themselves.
If the agent exercises due care, they are not liable for the acts or negligence of the person they appoint.
The person appointed is directly responsible for their own acts or negligence.
Illustrations:
(a)
A instructs B (merchant) to buy a ship.
B employs a reputable ship-surveyor to select a ship.
The surveyor negligently selects an unseaworthy ship, which is lost.
B is not liable to A and the surveyor is responsible.
(b)
A consigns goods to B (merchant) for sale.
B hires a reputable auctioneer to sell the goods and allow the auctioneer to collect the proceeds.
The auctioneer later becomes insolvent without accounting for the proceeds.
B is not liable to A for the auctioneer’s insolvency.
The agent must exercise ordinary prudence in choosing a person to act for the principal; once this standard is met, liability rests with the appointed person, not the agent.
Section 196. Right of person as to acts done for him without his authority , Effect of ratification.
If a person acts on behalf of another without that person’s knowledge or permission, the acts are unauthorized.
The person for whom the acts were done can choose to ratify (approve) or reject them.
If the acts are ratified, they are treated as if they were originally authorized.
The legal consequences are the same as if proper authority had existed from the beginning.
Essentially:
Ratification validates previously unauthorized acts, making them binding as if originally authorized.
If the person disowns the acts, they have no effect, and the actor may be responsible for acting without authority.
Section 197. Ratification may be expressed or implied.
Ratification may be Expressed or Implied.
Express ratification:
The person on whose behalf the act was done can explicitly approve or authorize the act after it has been done.
Implied ratification:
Ratification can also be inferred from the person’s conduct.
Actions showing acceptance of the benefits of the unauthorized act or acknowledgment of it may imply ratification.
Ratification can be expressly stated or inferred from behavior, making unauthorized acts legally valid.
Illustrations:
(a)
A buys goods for B without B’s authority.
Later, B sells the goods to C on his own account.
B’s actions indicate he accepts the purchase; this implies ratification of A’s act.
(b)
A lends B’s money to C without B’s consent.
Later, B accepts interest paid by C.
B’s acceptance of interest implies ratification of the loan.
Section 198. Knowledge requisite for valid ratification
A person cannot validly ratify an act unless they have full knowledge of all material facts relating to that act.
Ratification is a legal approval, so it must be based on informed consent.
If someone ratifies an act without knowing key facts, the ratification is invalid.
Section 199. Effect of ratifying unauthorized act forming part of a transaction.
When a person ratifies an unauthorized act done on their behalf, they ratify the entire transaction of which that act is a part, not just the single act.
Ratification cannot be selective and it applies to the whole connected transaction.
Illustration:
A, without authority, signs part of a contract for B.
B ratifies A’s unauthorized act.
By ratifying, B is deemed to accept and validate the entire contract, not just the part signed by A.
Section 200. Ratification of unauthorized act cannot injure third person.
If a person acts without authority on behalf of another, and that act would harm a third party or affect their rights, ratification by the principal cannot make it effective against that third party.
Ratification can confirm acts between the principal and agent, but it cannot prejudice the rights of innocent third parties.
Illustrations:
(a)
A without B’s authorization, demands delivery of B’s chattel from C.
Even if B ratifies A’s demand, C cannot be held liable for refusing to deliver, because A had no authority initially.
(b)
A holds a lease from B, terminable on three months’ notice.
C without authority, gives notice to terminate.
B cannot ratify C’s notice to make it binding on A.
Ratification only validates acts between principal and agent, not acts that infringe third-party rights.
