Contract of agency 2


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Contract of agency 2

  1. 1. Chapter 2Contract of Agency
  2. 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. 3. Essentials and legal rules1. There should be an agreement between the principal and the agent :Agreement may be: Express or implied2. 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. 4. General rules of agency1. Whatever a person can lawfully do himself, he may also do the same through an agent2. He who acts through another, does by himselfDistinction b/w agent & servant.
  5. 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. 6. Kinds of agentsI. 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 employmentEg: 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. 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 goodsAn 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. 8. Types of Mercantile Agents1. 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 name2. Broker: appointed to negotiate and make contracts for the sale and purchase on behalf of the principal – not given possession – not in his own name3. Commission agent: buys and sells and receives commission
  9. 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. 10. Duties of an agent1. Duty to follow the instructions of the principal – if not..2. Duty to carry out the work with care and skill3. Duty to render accounts to the principal4. Duty to communicate with principal – if no time5. Duty not to deal on his own account6. Duty not to make secret profits from agency7. Duty to pay the amount received for the principal
  11. 11. Conti…8. Duty not to use the information, received in the course of agency, against the principal9. Duty to protect the interest of the principal in case of his death or insanity10. Duty not to delegate authority
  12. 12. Rights of an agent1. Rights to retain money due from the principal2. Right to receive remuneration3. Right of lien – The agent has the right to retain goods, papers and other property- only particular lien4. Right to be indemnified against consequences of lawful acts.5. Right to compensation6. Right to be indemnified against consequences of acts done in good faith7. Right of stoppage of goods in transit.(a) Principal becomes insolvent(b) Agent has bought goods out of his own money
  13. 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. 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. 15. Creation of agency1. Agency by express agreement2. Agency by implied agreement3. Agency by ratificationA. Agency by express agreementAppointment in writing or by words of mouthUsual form of a written agreement : Power of attorney – General power of attorney or Special PA
  16. 16. B. Agency by implied agreementDue 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 estoppel2. Agency by holding out3. Agency by necessity
  17. 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. 18. Conti…Agency by holding out:More than estoppel – positive or affirmative conduct of the principal is requiredAgency by necessity:Due to extraordinary circumstances, person may be compelled to act without requiring the consent or authority
  19. 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. 20. Conti…Cases:1.Where the agent exceeds his authority bonafide in an emergency2.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. 21. Conti…c. Agency by operation of lawe.g. The Partnership Actd. Agency by ratificationA person does some acts on behalf of another person without his knowledge or authorityAnother person subsequently accepts the acts Then: Agency by ratificationAlso known as ex-post facto agency (agency arising after the event)
  22. 22. Conditions for valid ratification1. The agent must act on behalf of the principal2. The principal must be competent to contract and in existence at the time of contract by the agent3. There should be an act capable of ratification4. The principal must have full knowledge of the material facts.5. Whole transaction must be ratified6. Within a reasonable time.7. Ratification must not injure a third party.
  23. 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 authority1. Actual or real authority2. Ostensible or apparent authority
  24. 24. 1.Actual or real authority Authority conferred upon the agent by his principalTwo kinds:1. Express authority2. Implied authority: conferred upon the agent by the conduct of the principal2.Ostensible or apparent authorityThe act is in excess of the actual authorityAuthority due to the appearance created by the principal3.Authority in necessity
  25. 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 appointedCases:1. Express authority from the principal2. Where the principal has impliedly, by his conduct allowed such delegation of authority.3. Ordinary Custom of a particular trade4. Nature of the work5. Acts which do not require personal or professional skill6. Due to unforeseen emergencies
  26. 26. Relationship between principal and sub-agentDiscussed under two heads:1. Where the sub-agent is properly appointed2. Where the sub-agent is improperly appointed1.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. 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. 28. Termination of agencyEnd of the relationship of a principal and his agentStudied under:1. Termination of agency by act of the parties2. Termination of agency by operation of law1.Termination of agency by act of the parties1. Agreement -between the principal and agent2. 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. 29. II.Termination of agency by operation of law1. Completion of agency business2. Expiry of time3. Death of the principal or the agent4. Insanity of the principal or the agent5. Insolvency of the principal6. Destruction of the subject-matter of the agency7. Dissolution of a company8. Principal or agent becomes alien enemy
  30. 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 agency1. Where the agency is coupled with interest- where the agent has some interest over the subject matter2. When revocation would cause the agent personal loss3. When the authority has been partly exercised by the agent.
  31. 31. Bailment and PledgeBailment (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. 32. BailmentIn which the personal property of one person, temporarily, goes into the possession of another person for some specific purpose.Ownership with : one person who deliversPossession with: another person who receives for a purposeSo, change of possession only
  33. 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 goodsBailee: The person to whom the goodsare delivered
  34. 34. Examples :Hiring a bicycleGiving cloth to a tailorDelivering watch for repairKeeping valuables in locker of abank.
  35. 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 goodsb. Constructive delivery: Only effect of putting the goods into the bailee’s possessionNote: Delivery of possession and custody of goods Bank and a customer- Goods stored at godown- Bill of lading
  36. 36. 2. The delivery should be for some purposeNot necessary that the purpose should be expressly stated3. The delivery should be on the basis of some contract.The contract may be express or impliedThe bailment may also arise sometimes even without a contract ( Finder of the goods)
  37. 37. 4. The delivery should be upon a condition to return – Goods may be returned in its original form or in its altered formNote: The bailment can be made only of movable goods.Classification of Bailment/Kinds1. Bailment on the basis of rewards2. Bailment on the basis of benefits
  38. 38. 1. Bailment on the basis of rewards:a. Gratuitous bailment : Bailment without any charges or rewardb. Non-gratuitous bailment: bailment for reward2. Bailment on the basis of benefits:a. Bailment for the exclusive benefit of the bailorb. Bailment for the exclusive benefit of the baileec. Bailment for the mutual benefit of both bailor and bailee
  39. 39. Duties of a bailee1. 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. 40. 2. Duty not to make unauthorised use of goods entrusted to him.3. Duty not to mix goods bailed with his own goodsa. Mixing the goods with bailor’s consentb. Mixing the goods without the bailor’s consent and the goods are separablec. Mixing the goods without the bailor’s consent and the goods are not separable4.Duty to return the goods5.Duty to deliver any accretion to the goods
  41. 41. Duties of a bailor1. Duty to disclose faults in the goods baileda. Duty of a gratuitous bailor : known and which are material – Otherwise liable for damagesb. Duty of a non-gratuitous bailor: see that reasonably safe – liable whether known or not known2.Duty to repay necessary expenses in case of gratuitous bailment3.Duty to repay any extraordinary expenses in case of non- gratuitous bailment
  42. 42. 4. Duty of indemnifying the bailee• Arises when bailor has no title to the goodsBailor 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 bailment5. Duty to receive back the goods
  43. 43. Rights of a bailee1.Enforcement of bailor’s duties2.Right to deliver goods to one of several joint bailor’s3.Right to deliver goods in good faith to bailor without title4.Right of lien : Right to retain the possession until charges are paid– Two types:Particular and General
  44. 44. Particular lien: Right to retain only those particular goods in respect of which the charges are due. Generally, bailee has this lien onlyCondtions:(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. 45. General lien: Right to retain any goods bailed for any amount dueBankers: 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 GLWharfingers: 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. 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 capacityPolicy brokers: They can retain the policy of fire or marine insurance for their brokerage.
  47. 47. Rights of the bailorDuties of the bailee = Rights of the bailor1. Enforcement of bailee’s duties2. Right to terminate the bailment if the bailee uses the goods wrongfully3. Right to demand return of goods at any time in case of gratuitous bailment
  48. 48. Termination of bailment1. Expiry of the specified period2. Achievement of the object3. Inconsistent use of goods4. Death of the bailor or bailee5. Termination by a bailor
  49. 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 baileeDuties:1.Duty to find the true owner2.Duty to take reasonable care of the goods as a bailee
  50. 50. Rights:1.Right to retain possession of the goods until the true owner is found2.Right to lien over the goods for expenses3.Right to sue for reward4.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. 51. Pledge A special kind of bailment Goods are delivered as a security for a loan or for the fulfillment of an obligationDefinition:“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. 52. Essential features of a valid pledge1. Delivery of possession2. Delivery should be upon a contract3. Delivery should be for the purpose of security4. Delivery should be upon a condition to return5. Only of movable goods
  53. 53. Distinction between bailment & Pledge1. As to purpose2. As to right to sale3. As to right of using the goods.
  54. 54. Duties of a pawnor (similar to bailor)Additional1. 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. 55. Duties of a pawnee ( similar to bailee)1. To take reasonable care of the goods pledged2. Duty not to make any unauthorised use of the goods pledged3. Not to mix the goods pledged with his own goods4. Not to do any act in violation of the terms of the contract5. Duty to return the goods pledged on receipt of his full dues.6. To deliver any accretion to the goods pledged.
  56. 56. Rights of a pawnorAdditional:1. Enforcement of pawnees duties2. Right to redeem the goods pledgedRights of pawnee1. Right of retainer2. Right of retainer for subsequent advances3. Right to extra-ordinary expenses4. 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. 57. Pledge by non-ownersPledge by non-owners may not be valid except under:1. Pledge by a mercantile agent2. Pledge by a person in possession under a voidable contract.3. Pledge by a person having a limited interest in the goods4. Pledge by a seller in possession after sale5. Pledge by a buyer in possession after sale6. Co-owner in possession.