Cheat Sheet: Contract of Agency

1. Essential Definitions

2. Creation of Agency

2.1 Modes of Creation

2.2 Who May Employ an Agent (Section 183)

• Any person who is of age of majority and sound mind
• Minor or person of unsound mind cannot appoint an agent legally

2.3 Who May Be an Agent (Section 184)

• Any person; need not be of age of majority or sound mind
• Minor can be an agent but not personally liable to principal
• Principal responsible to third parties for acts of agent even if agent is minor

2.4 Consideration Not Necessary (Section 185)

• No consideration required to create agency relationship
• Gratuitous agency is valid and enforceable

3. Types of Agents

4. Authority of Agent

4.1 Express Authority

• Authority explicitly conferred by principal through words spoken or written
• Agent must act within scope of express authority given

4.2 Implied Authority (Section 187-188)

• Authority to do every lawful thing necessary for carrying out the express authority
• Authority to do acts incidental to and in ordinary course of such business
• Agent has implied authority to do what is usual and customary in the trade or business

4.3 Extent of Agent's Authority (Section 188)

• Agent cannot do acts beyond scope of authority conferred
• Authority must be strictly construed; agent cannot exceed it
• Any act beyond authority does not bind principal unless ratified

4.4 Agent's Authority in Emergency (Section 189)

• Agent has authority to do all lawful acts necessary to protect principal from loss
• Applies when agent cannot communicate with principal
• Acts must be reasonable and bona fide in the circumstances

5. Sub-Agency and Substituted Agency

5.1 Appointment of Sub-Agent (Section 190-191)

5.2 Substituted Agent (Section 194)

• Agent with express or implied authority appoints substitute to act in business of agency
• Substituted agent becomes agent of principal for the business
• Principal bound by acts of substituted agent; substituted agent responsible to principal
• Original agent not responsible for acts of substituted agent unless fraud/willful default in selection

5.3 Relation Between Principal and Sub-Agent (Section 193)

• Where sub-agent properly appointed: principal represented by and bound by sub-agent
• Sub-agent responsible to agent only; agent responsible to principal

6. Duties of Agent

6.1 Additional Duties

• Duty not to delegate (delegatus non potest delegare) unless authorized
• Duty not to make secret profit or take advantage of position
• Duty to maintain confidentiality of principal's affairs
• Duty not to put himself in position where interest and duty conflict
• Duty to act in good faith and protect principal's interests

7. Rights of Agent

7.1 Right to Remuneration (Section 219-220)

7.2 Right to Retainer (Section 217)

• Agent entitled to retain out of sums received on account of principal all money due to himself
• Includes remuneration, advances, and expenses properly incurred

7.3 Right of Lien (Section 221)

• Agent entitled to retain goods, papers, and property of principal received by him
• Lien available until amount due for remuneration, advances, and expenses is paid
• Not applicable where agent acted wrongfully

7.4 Right to Indemnity (Section 222-223)

7.5 Right to Compensation (Section 225)

• Agent entitled to compensation for injury sustained by reason of principal's neglect or want of skill

8. Rights and Liabilities of Principal

8.1 Rights of Principal

• Right to receive accounts from agent
• Right to receive all benefits obtained by agent in execution of agency
• Right to receive all money received by agent on his behalf
• Right to hold agent liable for breach of duty

8.2 Principal's Liability to Third Parties (Section 226-227)

8.3 Liability for Agent's Fraud (Section 238)

• Principal liable for fraud committed by agent acting within scope of authority
• Applies even if fraud done without principal's knowledge
• Principal liable to third parties who deal with agent in good faith

8.4 Liability for Agent's Misrepresentation (Section 238)

• Principal liable for misrepresentations made by agent within scope of authority
• Third party can rescind contract or claim damages

9. Agent's Personal Liability

9.1 General Rule

• Agent not personally liable when acting within authority and in principal's name
• Agent drops out once principal disclosed and contract made on his behalf

9.2 Situations of Personal Liability

9.3 Agent's Right Against Third Party (Section 233)

• Where agent personally bound, agent can enforce contract against other party

10. Termination of Agency

10.1 By Act of Parties (Section 201)

10.2 By Operation of Law (Section 201)

• Completion or performance of agency business
• Expiry of time period for which agency created
• Death of principal or agent (Section 209)
• Insanity of principal or agent (Section 210)
• Insolvency of principal (agent cannot bind principal after insolvency)
• Destruction of subject matter of agency
• Dissolution of company (when principal or agent is company)
• Termination of sub-agency on termination of principal agency (Section 210)

10.3 Irrevocable Agency (Section 202)

10.4 Consequences of Revocation (Section 207)

• Notice of revocation must be given to third parties who dealt with agent
• Third parties unaware of revocation can hold principal liable
• Reasonable notice of revocation required (Section 206)

10.5 Liability on Wrongful Termination (Section 205)

• Principal liable to compensate agent for wrongful revocation before business completed
• Agent liable to compensate principal for wrongful renunciation (Section 206)
• No compensation if agency terminates by operation of law

11. Ratification

11.1 Essentials of Valid Ratification (Section 196-200)

11.2 Effect of Ratification (Section 196-197)

• Ratification relates back to date of original act (doctrine of relation back)
• Creates agency from date of unauthorized act
• Principal bound as if agent acted with prior authority
• Ratification can be express or implied from conduct (Section 197)

12. Special Situations

12.1 Agent's Duty on Principal's Death/Insanity (Section 209)

• Agent must take reasonable steps to protect interests of representatives of principal
• Duty continues until representatives can take necessary steps themselves

12.2 Agent's Liability for Breach of Warranty of Authority

• Person representing himself as agent without authority liable for breach of warranty
• Third party can sue agent for damages if acts without authority
• Agent liable even if acted in good faith believing he had authority

12.3 Del Credere Agent

• Agent who guarantees that third parties will perform contracts
• Receives additional commission for guarantee
• Liable to principal if third party defaults
• No distinction in Indian law between del credere agent and surety

12.4 Pretended Agent (Section 235)

• Person falsely representing himself as agent
• No person suffers by acts of such pretended agent if principal did not hold him out as agent
• Third party cannot hold principal liable for pretended agent's acts

12.5 Effect of Agency on Third Party Rights (Section 228-229)

13. Key Case Principles

13.1 Important Doctrines

• Doctrine of Holding Out: Principal liable for acts of person held out as agent even without actual authority
• Doctrine of Relation Back: Ratification relates back to date of unauthorized act
• Doctrine of Apparent Authority: Principal bound by acts within apparent scope of authority represented to third parties
• Qui Facit Per Alium Facit Per Se: He who acts through another acts himself; principal liable for agent's acts
• Delegatus Non Potest Delegare: Delegate cannot further delegate; agent cannot appoint sub-agent without authority

14. Important Distinctions