2. Definition of Agent & Principal
An agent is a person employed to do any act for
another or to represent another in dealings with third
persons.
The person for whom such acts are done or who is
represented is called the principal.
The contract which creates relationship of principal &
agent is called an agency.
3. Essentials and legal rules
1. There should be an agreement between the principal and
the agent :Agreement may be: Express or implied
2. The agent must act in the representative capacity.
3. The principal must be competent to contract.
4. The agent need not be competent to contract. Why? But in
the interest of the principal?
5. The consideration is not necessary.
4. General rules of agency
1. Whatever a person can lawfully do himself, he may
also do the same through an agent
2. He who acts through another, does by himself
Distinction b/w agent & servant.
5. Conti…
Who may employ an agent?
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.
Who may be an agent?
As between the principal and third persons any person may
become an agent
6. Kinds of agents
I. From the point of view of the extent of their authority :
1.General Agent- Is one employed to do all the acts
connected with a particular business or employment
Eg: manager of a firm.
2. Special Agent – employed to do some particular act or
represent his principal in some particular transaction.
Eg: agent employed to sell a motor car.
3.Universal Agent – Whose authority is unlimited. He
enjoys extensive powers to transact every kind of
business on behalf of principal.
7. Conti…
II. From the point of view of the nature of work performed
by them:
I. Mercantile agent-
An agent dealing in the buying and selling of the goods
An agent who has the authority either to sell the goods, or
to consign the goods for the purpose of sale, or to buy
the goods or to raise the money on the security of the
goods on behalf of his principal
8. Types of Mercantile Agents
1. Factor: possession of the goods is given for the
purpose of selling the same – sells in his own
name – has general lien – usually sells in his own
name
2. Broker: appointed to negotiate and make contracts
for the sale and purchase on behalf of the principal
– not given possession – not in his own name
3. Commission agent: buys and sells and receives
commission
9. Conti…
4.Del credere agent: One who in consideration of an extra
commission, guarantees his principal that the third
persons with whom he enters into contracts on behalf
of the principal shall perform their financial obligations
i.e. if the buyer does not pay , he will pay.
II. Non- mercantile agents :
Does not usually deal in the buying or selling of the goods.
They include Insurance agents ,Counsels or
advocates, wife,etc.
10. Duties of an agent
1. Duty to follow the instructions of the principal – if not..
2. Duty to carry out the work with care and skill
3. Duty to render accounts to the principal
4. Duty to communicate with principal – if no time
5. Duty not to deal on his own account
6. Duty not to make secret profits from agency
7. Duty to pay the amount received for the principal
11. Conti…
8. Duty not to use the information, received in the course of
agency, against the principal
9. Duty to protect the interest of the principal in case of his
death or insanity
10. Duty not to delegate authority
12. Rights of an agent
1. Rights to retain money due from the principal
2. Right to receive remuneration
3. Right of lien – The agent has the right to retain goods,
papers and other property- only particular lien
4. Right to be indemnified against consequences of lawful
acts.
5. Right to compensation
6. Right to be indemnified against consequences of acts
done in good faith
7. Right of stoppage of goods in transit.
(a) Principal becomes insolvent
(b) Agent has bought goods out of his own money
13. Rights of principal
Recover damages from agent if he disregards
directions of Principal
Obtain accounts from Agent
Recover moneys collected by Agent on behalf of
Principal
Obtain details of secret profit made by agent and
recover it from him
Forfeit remuneration of Agent if he misconducts the
business
14. Duties of principal
Pay remuneration to agent as agreed
Indemnify agent for lawful acts done by him as agent
Indemnify Agent for all acts done by him in good
faith
Indemnify agent if he suffers loss due to neglect or
lack of skill of Principal.
15. Creation of agency
1. Agency by express agreement
2. Agency by implied agreement
3. Agency by ratification
A. Agency by express agreement
Appointment in writing or by words of mouth
Usual form of a written agreement : Power of attorney – General
power of attorney or Special PA
16. B. Agency by implied agreement
Due to the conduct of the parties or the course of dealing
between the parties or the situation of a particular
case.
Agencies by an implied agreement includes:
1. Agency by estoppel
2. Agency by holding out
3. Agency by necessity
17. Conti…
Agency by estoppel :
Where a person by his words or conduct has willfully led
another to believe that certain set of circumstances or
facts exist, and the other person has acted on that belief,
he is estopped from denying the truth of such statements
although such a state of things did not in fact exist.
18. Conti…
Agency by holding out:
More than estoppel – positive or affirmative conduct of the
principal is required
Agency by necessity:
Due to extraordinary circumstances, person may be
compelled to act without requiring the consent or
authority
19. Conti…
Conditions:
• There must be real emergency to act on behalf of the
Principal.
• Agent not in a position to obtain instructions
• Acting honestly and in the interest of the Principal
• Adopting reasonable and practicable course of action
20. Conti…
Cases:
1.Where the agent exceeds his authority bonafide in an
emergency
2.Where the carrier of goods acting as a bailee, does
anything to protect or preserve the goods.
3.Where husband improperly leaves his wife without
providing proper means for her sustenance.
21. Conti…
c. Agency by operation of law
e.g. The Partnership Act
d. Agency by ratification
A person does some acts on behalf of another person
without his knowledge or authority
Another person subsequently accepts the acts Then:
Agency by ratification
Also known as ex-post facto agency (agency arising
after the event)
22. Conditions for valid ratification
1. The agent must act on behalf of the principal
2. The principal must be competent to contract and in
existence at the time of contract by the agent
3. There should be an act capable of ratification
4. The principal must have full knowledge of the material
facts.
5. Whole transaction must be ratified
6. Within a reasonable time.
7. Ratification must not injure a third party.
23. Relations of principal with third parties
Scope and extent of agent’s authority
Principal and the third party
Personal liability of the agent
Agent’s authority
Power or capacity to bind the principal with the third
party
Two types of authority
1. Actual or real authority
2. Ostensible or apparent authority
24. 1.Actual or real authority
Authority conferred upon the agent by his principal
Two kinds:
1. Express authority
2. Implied authority: conferred upon the agent by the
conduct of the principal
2.Ostensible or apparent authority
The act is in excess of the actual authority
Authority due to the appearance created by the principal
3.Authority in necessity
25. Delegation of authority by an agent
General rule:
“ Delegatus non-protest delegare” i.e. a delegate cannot
further delegate
But in exceptional cases sub-agent can be appointed
Cases:
1. Express authority from the principal
2. Where the principal has impliedly, by his conduct
allowed such delegation of authority.
3. Ordinary Custom of a particular trade
4. Nature of the work
5. Acts which do not require personal or professional skill
6. Due to unforeseen emergencies
26. Relationship between principal and sub-agent
Discussed under two heads:
1. Where the sub-agent is properly appointed
2. Where the sub-agent is improperly appointed
1.Where the sub-agent is properly appointed
(a)The principal is bound and is liable to third parties for the
acts of the sub-agent
(b) Where the agent is responsible to the principal for the
acts of sub-agent.
(c )The Sub-agent is responsible for his acts to original agent
not to principal except in fraud or willful wrong
27. II. Where the sub-agent is improperly appointed
(a)The principal is not represented by sub-agent and hence
he is not liable for acts of the sub-agent
(b)The agent is responsible for the acts of the sub-agent to
the principal as well as to the third parties
(c)The sub-agent is not responsible to principal at all.
28. Termination of agency
End of the relationship of a principal and his agent
Studied under:
1. Termination of agency by act of the parties
2. Termination of agency by operation of law
1.Termination of agency by act of the parties
1. Agreement -between the principal and agent
2. Revocation by the principal : Revocation may be express
or implied – There are conditions
(i) In case of continuous agency
(ii) Where an agency has been created for a fixed period of
time.
3. Renunciation of agency by the agent
29. II.Termination of agency by operation of law
1. Completion of agency business
2. Expiry of time
3. Death of the principal or the agent
4. Insanity of the principal or the agent
5. Insolvency of the principal
6. Destruction of the subject-matter of the agency
7. Dissolution of a company
8. Principal or agent becomes alien enemy
30. Effectiveness of termination:
As between the principal and agent, termination of agency is
effective only when it becomes known to the agent.
- Third parties- when it is known to them.
Irrevocable agency
1. Where the agency is coupled with interest- where the
agent has some interest over the subject matter
2. When revocation would cause the agent personal loss
3. When the authority has been partly exercised by the
agent.
31. Bailment and Pledge
Bailment (derived from French word ‘bailler’) :
Delivering a thing under a contract for return at a specified
time or specified conditions.
e.g. giving a TV to a mechanic for repair
( a contract of bailment)
32. Bailment
In which the personal property of one person, temporarily,
goes into the possession of another person for some
specific purpose.
Ownership with : one person who delivers
Possession with: another person who receives for a purpose
So, change of possession only
33. Definition:
“ A bailment is the delivery of goods by one person to
another for some purpose, upon a contract that they
shall, when the purpose is accomplished, be returned
or otherwise disposed of according to the directions
of the person delivering them”
Two parties:
Bailor: The person delivering the goods
Bailee: The person to whom the goods
are delivered
34. Examples :
Hiring a bicycle
Giving cloth to a tailor
Delivering watch for repair
Keeping valuables in locker of a
bank.
35. Essential features:
1. The delivery of movable goods by one person to
another person.
Delivery may be of two types:
a. Actual delivery: Handing over physical possession of the
goods
b. Constructive delivery: Only effect of putting the goods
into the bailee’s possession
Note: Delivery of possession and custody of goods
Bank and a customer
- Goods stored at godown
- Bill of lading
36. 2. The delivery should be for some purpose
Not necessary that the purpose should be expressly stated
3. The delivery should be on the basis of some contract.
The contract may be express or implied
The bailment may also arise sometimes even without a
contract ( Finder of the goods)
37. 4. The delivery should be upon a condition to return –
Goods may be returned in its original form or in its altered
form
Note: The bailment can be made only of movable goods.
Classification of Bailment/Kinds
1. Bailment on the basis of rewards
2. Bailment on the basis of benefits
38. 1. Bailment on the basis of rewards:
a. Gratuitous bailment : Bailment without any charges or
reward
b. Non-gratuitous bailment: bailment for reward
2. Bailment on the basis of benefits:
a. Bailment for the exclusive benefit of the bailor
b. Bailment for the exclusive benefit of the bailee
c. Bailment for the mutual benefit of both bailor and
bailee
39. Duties of a bailee
1. Duty to take reasonable care of the goods bailed
If required degree of care is taken then not liable for loss
Standard of care is same in all types
Measure of care depends on nature, quality, quantity, and
value of the goods
Bailee not liable, if events are beyond the control of bailee
If stolen, reasonable steps otherwise liable
Burden of proof on bailee
Loss due to the negligence of the servant
40. 2. Duty not to make unauthorised use of goods entrusted to
him.
3. Duty not to mix goods bailed with his own goods
a. Mixing the goods with bailor’s consent
b. Mixing the goods without the bailor’s consent and the
goods are separable
c. Mixing the goods without the bailor’s consent and the
goods are not separable
4.Duty to return the goods
5.Duty to deliver any accretion to the goods
41. Duties of a bailor
1. Duty to disclose faults in the goods bailed
a. Duty of a gratuitous bailor : known and which are
material – Otherwise liable for damages
b. Duty of a non-gratuitous bailor: see that reasonably safe
– liable whether known or not known
2.Duty to repay necessary expenses in case of gratuitous
bailment
3.Duty to repay any extraordinary expenses in case of non-
gratuitous bailment
42. 4. Duty of indemnifying the bailee
• Arises when bailor has no title to the goods
Bailor title may be defective:
At the time of bailment
At the time of receiving back the goods from the bailee
At the time of giving directions in respect of the goods
bailed
• Premature termination of gratuitous bailment
5. Duty to receive back the goods
43. Rights of a bailee
1.Enforcement of bailor’s duties
2.Right to deliver goods to one of several joint bailor’s
3.Right to deliver goods in good faith to bailor without title
4.Right of lien : Right to retain the possession until charges
are paid
– Two types:
Particular and General
44. Particular lien:
Right to retain only those particular goods in respect of
which the charges are due.
Generally, bailee has this lien only
Condtions:
(a) Bailee must have rendered some service in relation to the thing
bailed , must be entitled to some remuneration- and must be unpaid
(b) Service rendered by the bailee must be one involving the exercise of
labour or skill in respect of the goods bailed.
(c ) Services must have been performed in full –directions of bailor
(d) There must not be an agreement to perform the services on credit.
(e) The goods must be in possession of the bailee. Bailee loses the lien,
if possession is lost
(f) Must not be any contract to contrary.
45. General lien:
Right to retain any goods bailed for any amount due
Bankers: Has general lien on all goods, cash, cheques and
securities deposited with him as banker by a customer, for
any money due to him as a banker.
Factors: An agent entrusted with the possession of goods for
the purpose of selling on behalf of his principal.
If goods are delivered for some other purpose, no GL
Wharfingers: A person who owns or keeps a wharf.
Wharf: Place, adjoining to water, used for loading and
unloading goods from ships – not to store
46. Attorneys (solicitor) of a HC : A person who acts legally for
another – lien on all the papers and documents of the
client provided they are delivered in professional capacity
Policy brokers: They can retain the policy of fire or marine
insurance for their brokerage.
47. Rights of the bailor
Duties of the bailee = Rights of the bailor
1. Enforcement of bailee’s duties
2. Right to terminate the bailment if the bailee uses the
goods wrongfully
3. Right to demand return of goods at any time in case of
gratuitous bailment
48. Termination of bailment
1. Expiry of the specified period
2. Achievement of the object
3. Inconsistent use of goods
4. Death of the bailor or bailee
5. Termination by a bailor
49. Finder of goods:
A person who finds the goods belonging to some other
person and takes them in his position.
A person finding goods not bound to take – but if picks up
and takes its possession, he becomes bailee
Duties:
1.Duty to find the true owner
2.Duty to take reasonable care of the goods as a bailee
50. Rights:
1.Right to retain possession of the goods until the true owner
is found
2.Right to lien over the goods for expenses
3.Right to sue for reward
4.Right of sale:
(a)When the thing is in danger of perishing
(b)When the lawful charges amount to two-third of its value
51. Pledge
A special kind of bailment
Goods are delivered as a security for a loan or for the
fulfillment of an obligation
Definition:
“The bailment of goods as security for payment of a
debt or for performance of a promise, is called
pledge. The bailor in this case is called the pawnor
(pledger). The bailee is called the pawnee (pledgee)”.
52. Essential features of a valid pledge
1. Delivery of possession
2. Delivery should be upon a contract
3. Delivery should be for the purpose of security
4. Delivery should be upon a condition to return
5. Only of movable goods
53. Distinction between bailment & Pledge
1. As to purpose
2. As to right to sale
3. As to right of using the goods.
54. Duties of a pawnor (similar to bailor)
Additional
1. To meet his obligation on stipulated date and comply
with terms of the contract (Duty to repay the loan)
2. To compensate the pawnee for any extraordinary
expenses incurred by him(Duty to pay expenses in case
of default)
55. Duties of a pawnee ( similar to bailee)
1. To take reasonable care of the goods pledged
2. Duty not to make any unauthorised use of the goods
pledged
3. Not to mix the goods pledged with his own goods
4. Not to do any act in violation of the terms of the
contract
5. Duty to return the goods pledged on receipt of his full
dues.
6. To deliver any accretion to the goods pledged.
56. Rights of a pawnor
Additional:
1. Enforcement of pawnees duties
2. Right to redeem the goods pledged
Rights of pawnee
1. Right of retainer
2. Right of retainer for subsequent advances
3. Right to extra-ordinary expenses
4. Right to sue the pawnor or sell the goods in case of default of the
pawnor:
To file a suit for the recovery of the amount
To retain the goods as security
To sell the goods by reasonable notice ( statutory requirement)
(may sell before filing a suit)
57. Pledge by non-owners
Pledge by non-owners may not be valid except under:
1. Pledge by a mercantile agent
2. Pledge by a person in possession under a voidable
contract.
3. Pledge by a person having a limited interest in the
goods
4. Pledge by a seller in possession after sale
5. Pledge by a buyer in possession after sale
6. Co-owner in possession.
