Rights of Agent

 The agent has a right to retain any sums received on account of the principal in the business of the
agency, all moneys due to himself in respect of his remuneration and advances made or expenses
properly incurred by him in conducting such business.
 The agent has a right to receive remuneration.
 Right of lien: In the absence of any contract to the contrary, an agent is entitled to retain goods,
papers and other property.
 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.
 Where he has bought goods for his principal by incurring a personal liability, he has a right of
stoppage in transit against the principal, in respect of the money which he has paid or is liable to
pay.
 Where he is personally liable to the principal for the price of the goods sold, he stands in the
position of an unpaid seller towards the buyer and can stop the goods in transit on the insolvency
of the buyer.

Duties Of Principal

 To indemnify against consequences of all lawful acts of agent

 To indemnify the agent against consequences of acts done in good faith
 To pay compensation against agent’s injury
 To pay the agent the commission or other remuneration agreed.

Liability of Principal to Third Parties For The Acts Of Agent (Sec. 226 to 228)

 Principal is liable for the acts of agent

 The principal is liable for all the acts of an agent which are lawful and within the scope of agent’s
authority.
 The contracts entered into by the agent on behalf of the principal have the same legal
consequences as if these contracts were made by the principal himself.
 When agent exceeds his authority: Whether the acts done within the authority are separable from
the acts done beyond authority.
 If yes – The principal is not bound for excess acts done by the agent.
 If no – The principal is not bound by the transaction and the principal can repudiate the whole
transaction.

Delegation

General rule: The general rule is that an agent cannot lawfully employ another act, which he has

expressly or impliedly undertaken to perform personally.

Exceptions

 There is a custom or usage of trade to that effect.

  Where power of the agent to delegate can be inferred from the conduct of the both the principle
and the agent.
 When the principal is aware of the intention of the agent to appoint sub agent by the does not
object to it.
 When principle permits appointment of a sub-agent.
 If the nature of the agency is such that the sub-agent is necessary

Extent of Agents authority

 Lawful Acts
 Emergency Authority
 Ostensible Authority

Personal Liability of an Agent

General Rule – No personal liability [ Sec.230]

In the absence of contract to contrary, an Agent cannot –

(a) personally enforce contracts entered into by him, on behalf of his Principal,

(b) be held personally liable for them.

This is because the Agent merely acts on behalf of his Principal. Thus, he enjoys immunity from
being personally sued.

Exceptions, i.e. Agent personally as well as Joint & Severally Liable

The Agent is personally liable in the following cases –

1. Foreign Principal [Sec.230] : Where the contract is made by an Agent for the sale or purchase of
goods for a merchant resident abroad.
2. Undisclosed Principal [Sec.230]: Where the Agent does not disclose the name of his Principal.
3. Principal cannot be sued [Sec.230]: Where the Principal, though disclosed, cannot be sued, e.g.
Principal becoming of unsound mind, subsequent to appointment of agent.
4. Acting for a Principal not in existence: Where the Agent acts for a Principal who is not in
existence at the time of making contracts, he shall be personally held liable e.g. contracts entered
into by Promoters before incorporation of a Company are made in their personal capacity and
hence personally liable.
5. Agency coupled with interest [Sec.202] : Where the Agent has an interest in the subject matter of
agency.
6. Agent guilty of Fraud [Sec.238] : Where an Agent is guilty of fraud or misrepresentation in
matters that are outside the scope of his authority, he is personally liable, and do not affect his
Principal.
 7. Agent exceeds authority & act not ratified: Where an Agent acts either without any authority or
exceeds his authority, he shall be held personally liable when the principal does not ratify his acts.
8. Agent receives or pays money: Where an Agent receives or pays money by mistake or fraud to a
third party, he shall be personally liable to such third party. Also ha can personally sue the third
party if the fraud or mistake is accountable to such third party.
9. Express Agreement for personal liability: Where an Agent expressly aggress to be personally
bound.
10. Execution of Contract in his own name: Where an Agent executes a contract in his own name,
without disclosing that he is acting as Agent for a Principal, he shall be personally liable, e.g. An
Agent signs a Negotiable Instrument without making it clear that he is signing it as an Agent
only, he shall be held personally liable on the same. He would be personally liable as Maker of
P/N, even though he may be described as Agent.
11. Trade custom or usage: Where trade usage or custom makes an Agent personally liable.
12. Agent with special interest: An Agent with special interest or with a beneficial interest, e.g. a
Factor or Auctioneer, can sue and be sued personally. [Subramanya vs Narayana]
13. Action against Agent or Principal [Sec 233] : Where the Agent is personally liable, a person
dealing with him may hold – (a) either him or (b) his Principal or (c) both of them liable. The
liability of Principal and Agent is “joint and several”.
14. Exclusive liability [Sec. 234]
 Where a person has made a contract with an Agent and –
 Induces such Agent to act upon it in the belief that only his principal would be held liable,
 Induces the principal to act upon it in the belief that only his Agent would be held liable.
 Such Third person cannot later on, shift the liability on to –
 The Agent, or
 The principal, respectively.

Termination of Agency

According to section 201, an agency is terminated by:

 By an agreement between the parties,

 By the principal revoking his authority
 By the agent renouncing the business of agency
 By the business of agency being completed
 By either the principal or the agent dying or becoming of unsound mind
 By the principal being adjudicated an insolvent under the provisions of any Act for the time being
in force for relief of insolvent debtors.
 On expiry of fixed period

Agency May Be Terminated by

 Agreement
 Revocation of authority by the principal
 By operation of Law
 Agency Termination By Operation Of Law
  On performance of the contract. Where an agent is appointed to perform a specified transaction,
his authority comes to an end on the completion of the said transaction.
 On expiry of time.
 When the agent or the principal dies or becomes of unsound mind. The death of the agent
terminates his authority.
 The death of one of the joint agents will terminate the agency only as far as he is concerned,
while it will continue to be valid as regards the other surviving agents in the absence of contrary
intention.
 On the insolvency of the principal
 On the destruction of the subject matter.
 On the principal becoming an alien enemy.
 On the dissolution of a company.
 On termination of sub-agent’s authority.

Exceptions

Irrevocable Agency: When an agency cannot be put an end to, it is said to be irrevocable agency. An
agency is irrevocable where the agent himself has an interest in the property which forms the subject-
matter of the agency.

Time when Termination takes Effect: The termination of the authority of an agent does not, so far as
regards the agent, take effect before it becomes known to him. As regards third persons, it terminates
when it comes to their notice.