Principal the person who appoints another

to contract with third parties.

Agent the person appointed to contract on
behalf of another.
Agency contract under which one party is
authorized to contract for another.

THE AGENT PRINCIPAL RELATIONSHIP

(Principal)

(Agent)

THE OUTSIDER PRINCIPAL

RELATIONSHIP
A

OS

(Outsider or Third Party)

On the basis of Extent of Authority:

General Agent
Special Agent
Universal Agent
On the basis of Nature of work:
Merchantile Agent
Non Merchantile Agent

Broker
Factor
Auctioneer
Del Credre Agents
Commission Agents
Clearing and Forwarding Agents

Insurance Agents
Attorneys
Solicitors
Election Agents

AGENCY BY AGREEMENT
Agency
normally
involves
the
principal authorizing an agent to act
on her behalf and the agent agreeing
to do so in return for some fee
Actual authority the power of an
agent
that
derives from
either
express or implied agreement
Apparent authority the power that
an agent appears to have because of
conduct or statements of the principal
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AGENCY BY ESTOPPEL
an agency relationship created when the
principal acts such that third parties
reasonably
conclude
that
an
agency
relationship exists

AGENCY BY RATIFICATION
an agency relationship created when one
party adopts a contract entered into on his
or her behalf by another who at the time
acted without authority
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Act on behalf of another person

Existence of a person
Capacity of parties
Express/ Implied
Full Knowledge
Lawful Acts
Contractual Capacity
Acts within Principals power
Within a reasonable time
Entire Transaction

10

LIABILITY OF THE PRINCIPAL TO THE

OUTSIDER

when an agent enters into a contract

on behalf of a principal with a third
party, it is the principal, not the
agent, who ordinarily is liable on the
contract

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Principal is bound by acts done by the agent

Agent done in excess of his authority but
within scope, the principal is bound by the
act of agent
Principal is liable for misrepresentation/fraud
of the agent if it is within scope of
employment
Principal is liable for unauthorized acts of an
agent

12

Third parties can proceed only against

principal and not against the agent

If agent fails to express /disclose the name

of the principal, when required by third
parties, he shall become personally liable to
third party

13

If agent makes any contract with a person,

who don't suspect that he is an agent, the
person has all rights against the agent as if,
he is principal
If the principal discloses himself before the
completion of contract, the party may
refuse to fulfill the contract

14

Compensation for revocation by principal

Notice of revocation or renunciation

Revocation and renunciation my be

expressed or implied.

15

Agent to be indemnified against

consequences of lawful acts
Agent to be indemnified against
consequences of acts done in good faith
Compensation to agent for injury caused by
his neglect

16

Agents duty in conducting

principals business
Skill and diligence required from
agent
To make compensation
To render accounts to his principal
Duty to communicate with principal
Duty to pay sums received for
principal

17

Agents right of retainer

When agents remuneration becomes

due

Agents lien on principals property

18

An agent cannot lawfully employ another to

perform acts which he has undertaken to
perform personally
A person who ha been delegated an act
cannot delegate it further.

19

When principal permits delegation

When agency requires delegation
When expressly provided that sub-agent will
be permitted
When the custom of the trade permits
delegation
When the nature of the agency requires
delegation

20

1.
P

OS

ACTUAL AUTHORITY

A acts within actual authority

P is liable to outsider

21

2.
P

A
ACTUAL AUTHORITY

A
APPARENT AUTHORITY

OS

A exceeds actual authority but acts within apparent

Authority P is liable to OS unless knew or ought to
have known of any limitation of As authority A is
liable to P for breaching authority
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3.
P

ACTUAL AUTHORITY

A
A

APPARENT AUTHORITY

OS
A exceeds both actual and apparent
authority
A is liable to OS
23

4.
P

A
ACTUAL AUTHORITY

(undisclosed)

OS

A acts for undisclosed P, P is liable to OS unless A

pretends to be P; then A may also be liable

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Sub agent (sec 191):

A person employed by original agent and
who acts under the control of the original
agent in the business of agency.
Substituted agent (sec 194):
A person who is named by the agent holding
an express or implied authority to name
another person, to act for the principal in the
business of agency.

25

In the case of undisclosed principal

In the case of a foreign principal
In the case of an express agreement
Principle of estoppel
Custom/usage of trade
Agency coupled with interest
Fictitious person or a non-existent person
Unauthorized acts
Misrepresentation or fraud by agent
When the principal cannot be sued
Pretended agent
26

By the act of the parties

By operation of law

27

By agreement between the principal and

the agent

Revocation of agency by the principal

Revocation by the agent

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By the performance of the contract of agency

By the insanity of principal or the agent
By insolvency of the principal and in some
cases, that of agent
By the expiry of time fixed for the agency
contract
By death of principal or agent
By renunciation of employment by the agent
When company is wound up
On principal becoming the alien enemy
On subject of subject-matter

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