About: Contract of Agency, Agent, principal, sub-agent and substitute agent

1. Presentation Prepared By
• Santosh Acharya (Roll Number 34)
• Samiksha Poudel (Roll Number 30)
• Sumina Dahal (Roll Number 27)

2. Contract of
Agency

3. Meaning: Contract of Agency
• A contract of agency is one that creates a legal relationship between the principal and
an agent.
• The person who has been delegated the authority to act on behalf of principal is called
an agent.
• The person who authorizes another to carry out some responsibility on his behalf is
called a principal.

4. Who is Principal?
• The Person who employs an agent in dealing with third person is called principal.
Who is an Agent?
• The Person who is employed with some powers to act on behalf of the principal
dealing with the third person is called an agent

5. Power of Attorney
• A power of attorney (POA) is a legal document giving one person (the agent or attorney-
in-fact) the power to act for another person (the principal).
• The agent can have broad legal authority or limited authority to make legal decisions
about the principal's property, finances or medical care.
• The power of attorney is frequently used in the event of a principal's illness or disability,
or when the principal can't be present to sign necessary legal documents for financial
transactions.

6. General Rules Of Agency
There are two general rules or legal principles on which the contract of agency
is based on.
1. Whatever a person can do ,he may do so through an agents
whatever a persons can do, he may do so through his agents by the power of
attorney, expect for the acts involving personal skills and qualification and
special authority.
2. One, who has an act done through another, done it by himself
The act done by an agent is the act of his act is the principle. All the acts of an
agent are carried out for the legal purpose.

7. Distinction between agent, servant & contractor
Differs in Agent Servant Contractor
Definition
A person or company represent another
in matters relating to contract
A person who is employed by someone
to work in a house for a payment
A person or company that enters into a
contract to do some work according to
agreement
Directives &
control
An agent is bound by lawful instruction
of principle ,but is not under a direction
control & supervision , has a
discretionary power
A servant acts under the direct control &
supervision of his principle, has no
discretionary power
A contractor acts under no instruction
of the employer ,he is free to do his
own acts according to his wish
Legal authority
An agent is employed with an authority
to bring the principle into legal relations
with third parties . Represents his
principle in dealings with the third
parties
A servant does not ordinarily do this
kind of act
A contractor has no authority of this
kind .he can enjoy his authority for his
own interest
Liability of
employer
Mistakes made by an agent with
authority are attributed to his principle
.the agent is not liable personally for the
act done
Mistakes made by the servant may
makes his master liable ,only when it is
committed at the time of employment
A contractor is liable personally for his
work done, he can make his principal
liable for his acts
Status
An agent cannot be servant of his
principle .he is a representative of the
principle
A servant may act as an agent of his
master
A contractor is not a representative of
his principle

8. Duties and Rights of the principal
Duties towards the third parties
1.Responsibility to the agent's acts:
● Acts within the scope of authority:
● Acts exceeding the scope of authority:
2. A notice given to the agent is a notice to the principal:
3.The liability of the principal is based on the ‘doctrine of estoppel’
4.Liability for the agent's misrepresentation or fraud

9. Duties towards the Agent
1. Bound to indemnify on lawful acts:
2. Payment of remuneration :
3. Bound to indemnity on the acts on good faith:
4. Bound to compensation caused by negligence:
5. Giving lawful instruction:

10. Rights of the principal
• Right to demand an account of a transaction regarding the agency
• Right to bind the agent to follow his instructions
• Right to demand the secret profit, if any, earned as his agent
• Right to revoke the authority of the agent in the following circumstances
- When the principal finds the agent acting unlawfully
- When the agent conceals the material facts from the principal
with an intention to deceive him.

11. Delegation of Authority
The general rule is that “an agent has no right to delegate his authority to another
person without the consent of his principal”.
The following are the circumstances on which the exceptions are based:
● Where the ordinary custom of trade permits the employment of a sub-agent.
● Where it is necessary because of nature of the agency business.
● Where the agent has express authority of his principal to appoint sub-agent.
● Where it is in the knowledge of the principal.

12. Sub-agent and substitute agent
• Sub-Agent
An agent can appoint a sub agent according to the nature of business, provisions and
practices of contracts relating to agency with the consent of the principal.
Thus, a sub-agent is an agent appointed by an agent. The relation of the sub-agent to
the original agent is like that of an agent to the principal.

13. • Substitute Agent
A substitute agent is the person appointed by an original agent to act for the principal in the
business of agency, with the knowledge and consent of the principal.
However, the duty of the original agent is to choose a proper substitute
agent with reasonable care.
But the original agent does not guarantee the skill, integrity and solvency of the substitute
agent.