Rights and Duties in an Agency under Indian Contract Act | Law Optional Notes for UPSC PDF Download

Agent under Indian Contract Act

Definition of an Agent: An agent is a person appointed to act on behalf of another, known as the principal. The relationship between a principal and an agent is established through a contract of agency.

Types of Agents

• Special Agent: Appointed for a specific, singular task.
• General Agent: Authorized to perform all acts related to a specific job.
• Sub-Agent: An agent appointed by another agent.
• Co-Agent: Agents appointed jointly to perform an act.
• Factor: An agent remunerated by commission, resembling the owner of the goods.
• Broker: Facilitates contractual relationships between parties.
• Auctioneer: Acts as a seller for the principal in auctions.
• Commission Agent: Appointed to buy and sell goods on behalf of the principal.
• Del Credere Agent: Acts as a salesperson, broker, and guarantor for the principal, ensuring credit extended to the buyer.
• Legal Interpretations: Legal cases like P. Krishna Bhatta v. Mundila Ganpathi Bhatta and Syed Abdul Khader v. Rami Reddy provide insights into the legal definitions and implications of agency relationships.
• Authority of an Agent: An agent's authority can be express or implied, allowing them to take necessary legal actions to fulfill the principal's tasks.
• Implied Authority: Includes incidental, usual, customary, and circumstantial authority, enabling agents to act as necessary in various situations.

Rights and Duties of an Agent under the Indian Contract Act

• Rights of an Agent: Agents have rights such as receiving compensation, reimbursement for expenses incurred, and indemnification for liabilities arising from authorized actions.
• Duties of an Agent: Agents are obligated to follow the principal's instructions, act with care and diligence, avoid conflicts of interest, and be accountable for their actions.
• Relationship Dynamics: The rights and duties of agents and principals are interconnected, forming the basis of a legally binding and ethical working relationship.

Rights of an Agent

• Right to Receive Remuneration: An agent has the right to receive payment for their services. However, if the agent is found guilty of misconduct in the business, they may not be entitled to remuneration for that part of the business.
• Right of Lien: In the absence of any contrary agreement, an agent can retain the principal's goods, papers, and other property until they receive the due amount for commission, disbursements, and services.
• Right to Indemnity: The agent must be protected against the consequences of lawful acts. This means the employer should compensate the agent for losses incurred while acting on behalf of the principal.
• Right to Compensation: An agent can claim compensation for injuries resulting from the principal's negligence or lack of skill. The principal is obligated to compensate the agent for such harm caused.

Duties of an Agent

• Agent's duty in conducting principal's business: An agent is responsible for carrying out the principal's business according to the principal's instructions or following common practices in that business domain. If the agent acts differently and causes any losses or gains, they must be accountable to the principal.
• Skill and diligence required from agent: An agent must perform the agency's business with the necessary skill and diligence expected in that field. They are obligated to act diligently, use their skills, and compensate the principal for any direct consequences of their negligence or misconduct. For example, in the case of Jayabharthi Corp v. Sv P.N. Rajasekhara Nadar, it was ruled that an agent must communicate effectively with the principal during challenging situations to avoid misconduct and resulting losses.
• Duty to render proper accounts: According to the Indian Contract Act, an agent must provide accurate accounts to the principal when requested.
• Duty to communicate with principal: An agent is required to make diligent efforts to communicate with the principal, especially in challenging circumstances, to seek instructions.
• Not to deal on his own Account: If an agent engages in the business of the agency without the principal's consent and fails to disclose all relevant information to the principal, the principal has the right to reject the transaction if it's shown that crucial facts were hidden or the agent's actions were detrimental.
• Not to make Secret Profits: An agent should not conduct business on their own behalf without the principal's knowledge to gain secret profits. The principal is entitled to claim any benefits resulting from such transactions.
• Duty to pay sums received for principal: As per the law, an agent must hand over all funds received on behalf of the principal.
• Not to Disclose Secret: It is the agent's duty to maintain the confidentiality of the agency's business and not disclose confidential information. For instance, in the case of Pannalal Jankidas v Mohanlal, an agent faced liability for not insuring goods as instructed by the principal, leading to losses incurred by the principal.

Conclusion

• An agent, when acting within their authority, can create rights and liabilities of a contract for the principal. If the agent enters a contract on behalf of the principal, the agent typically does not bear personal liability for that contract. Additionally, the agent does not gain contractual rights from the agreement.
• Contracts made through an agent and obligations resulting from the agent's actions can be enforced in the same way as if the principal had entered into the contracts or performed the acts personally.