Unit 9 - Agency

• Agent


  Person employed to act for another or to represent another in dealings with third persons
• Principal


  Person for whom such act is done, or who is represented
• Who can appoint an Agent

  • Any person who is of the age of majority, and who can be of sound mind
• Who can be an Agent

  • Any person even if they are a minor and person of unsound mind. But they are not responsible to the Principal
• No consideration is necessary to create agency
• Modes of creation of agency

  • Express Agreement
  • Implied Agreement
  • Operation of Law
  • Agency by Estoppel
  • Agency by Necessity
• Express Agreement


  Authority of the agent may be expressed or implied
• Implied Agreement


  Authority is said to be implied when it is inferred from the circumstances of the case
• Agency by Estoppel


  Where the principal by his conduct or statement willfully induces another person to believe that a certain person is his agent, the principal is estopped from denying the fact of agency
• Agency by Necessity


  An agent has authority to do all such acts as would be done by a person of ordinary prudence in his own case for the purpose of protecting the principal from loss in an emergency
• Conditions for valid agency by necessity

  • It must be impossible for the agent to get promptly instructions from the principal
  • There must be a real and definite necessity for the agent to act
  • The agent must act honestly in the interests of the principal
  • The agent must adopt the most reasonable and practicable course under the circumstances
  • The agent must have been in possession of the goods belonging to the principal which are the subject of the contract
• Agency by Ratification


  Where a person acts for some one without his knowledge and the other person subsequently ratifies the act, agency by ratification arises and the ratifier is bound as if he had expressly authorised the person to do the act on his behalf
• Essentials of a valid Ratification

  • The principal must be in existence at the time when the act was done
  • The principal must have contractual capacity at the time of the ratification
  • Ratification must be done with full knowledge of facts
  • Ratification must be done within a reasonable time
  • Only lawful acts can be ratified
  • The whole transaction must be ratified
  • Ratification must be communicated to the third party so as to bind him
  • Ratification can be of the acts which the principal had the power to do
  • Ratification should not put a third party to damages
• Agent's authority in normal circumstances

  An agent has authority to do every lawful thing which is necessary for the purpose of conducting such business, as is usually done in the ordinary course of conducting that business.
• Agent's authority in an emergency


  An agent has authority to do such acts as would be done by a person of ordinary prudence, for the purpose of protecting the principal from loss, under similar circumstances.
• Delegation of authority


  The general rule is that an agent cannot appoint an agent (delegatus non potest delegare), meaning an agent cannot further delegate their duties to another.
• Exceptions to the rule against delegation

  • Where expressly permitted by principal
  • Where the ordinary custom of trade permits delegation
  • Where the nature of agency cannot be accomplished without the appointment of a sub-agent
  • Where the nature of the job assigned to the agent is purely clerical and does not involve the exercise of discretion
  • In an unforeseen emergency
• Sub-agent


  A person appointed by the agent, who acts under the control and direction of the original agent.
• Relationship between sub-agent, agent and principal

  • There is no privity of contract between the principal and sub-agent
  • The principal cannot sue the sub-agent except for fraud or willful wrong
• Consequences where a sub-agent is properly appointed

  • Principal is liable to third parties for acts of the sub-agent
  • Agent is responsible to the principal for acts of the sub-agent
  • Sub-agent is responsible for his acts to the agent except in cases of fraud and willful wrong
  • Sub-agent cannot sue for remuneration
• Consequences where a sub-agent is improperly appointed

  • Principal is not liable to third parties for the acts of the sub-agent
  • Agent is responsible to the principal as well as to third parties for the acts of the sub-agent
  • The sub-agent is not responsible to the principal for anything, only to the agent
• Substituted agent


  A person appointed by the agent to act for the principal, in the business of agency, with the knowledge and consent of the principal. This is not a sub-agent.
• Duties of the agent in selecting a substituted agent

  • The agent is bound to exercise the same amount of discretion in selecting such agent for his principal as he would exercise in his own case, and if he does not do so, he is responsible to the principal for the acts or negligence of the agent so selected.
• Duties of the agent

  • To carry out the work according to the directions given by the principal
  • To carry out the work according to the usual custom of the place where such business is conducted
  • To carry out the work with reasonable care
  • To present proper accounts to the principal
  • To communicate with the principal in case of difficulty
  • Not to use the information obtained in the course of the agency against the principal
  • Not to delegate authority without the consent of the principal
• Agent's right to remuneration and reimbursement


  The agent may deduct from the money received for the principal all due remuneration and expenses properly incurred by him in conducting such business.
• An agent has authority to act within certain limits set by the principal.
• The agency can be created through express or implied consent.
• Agency is the relationship between two parties where one person (the agent) acts on behalf of another person (the principal).
• An agent must follow instructions provided by the principal regarding how to conduct business.
• Agents are required to exercise reasonable care when carrying out tasks assigned by the principal.