Page 115 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes 12.1 Definition of Agent and Agency
Agent is “a person employed to do any act for another or to represent another in dealings with
third person”. Thus, agent is a person who acts in place of another. The person for whom or on
whose behalf he acts is called the Principal. For instance, Anil appoints Bharat, a broker, to sell his
Maruti Car on his behalf. Anil is the Principal and Bharat is his agent. The relationship between
Anil and Bharat is called Agency. This relationship is based upon an agreement whereby one
person acts for another in transaction with a third person.
The function of agent is to bring about contractual relation between the principal and a third
party. The agent is only a connecting link between the principal and the third party and is rightly
called as ‘conduit pipe’. The acts of the agent, within the scope of the instructions, bind the principal
as if he has done them himself. The phrase ‘qui facit per alium facit per se’ contains the principle of
agency, which means, he who does through another does by himself. In simple words, the act of
agent is the act of the principal.

Agent must be distinguished from a servant. A servant acts under the direct control and
supervision of his master and is bound to carry out all his reasonable orders. Agent, on the
other hand, though bound to exercise his authority in accordance with lawful instructions of the
principal is not subject to his direct supervision and control. Agent, therefore, is not a servant;
though a servant, May for some purposes, be his master’s agent. Further, agent may work for
several principals at the same time; a servant usually serves only one master.
No consideration is necessary to create agency (S.185). The fact that the principal has consented

to be represented by the agent is a sufficient detriment and consideration to support the promise
of the agent to act in that capacity. However, in case no consideration has passed to the agent, he
is not bound to do the agreed work, but once he begins, he must complete it to the satisfaction
of the principal.

Who can Employ 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 agent (S.183). No qualifications as such are prescribed for a
person to be agent except that he has attained majority and is of sound mind. Thus, a minor or
a lunatic cannot contract through agent since they cannot contract themselves personally either.
If agent acts for a minor or lunatic, he will be personally liable to the third party. Association or

group of persons may also appoint agent; for instance, a partnership firm may, transact business
through agent. Certain group of persons, because of the very nature of their organisation, must
act through agent, e.g., a company, which is an artifi cial person and thus can transact business
only through agent.

Who may be Agent?
Since agent is a mere connecting link or a ‘conduit pipe’ between the principal and the third party,
it is immaterial whether or not the agent is legally competent to contract. Thus, there is no bar
to the appointment of a minor as agent. However, in considering the contract of agency itself
(i.e., the relation between principal and agent), the contractual capacity of the agent becomes
important. Thus, no person who is not of the age of majority and of sound mind can become
agent, as to be responsible to his principal (S.184). Thus, if the agent happens to be a person
incapable of contracting, then the principal cannot hold the agent liable, in case he misconducts
or has been negligent in the performance of his duties.

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