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Unit 12: Law of Agency

Notes
Example: Rahim appoints Kiran, a minor, to sell his car for not less than ` 90,000. Kiran
sells it for ` 80,000. Rahim will be held bound by the transaction and further shall have no right
against Kiran for claiming the compensation for having not obeyed the instructions, since Kiran
is a minor and a contract with a minor is void-ab-initio.

12.2 Different Kinds of Agencies

A contract of agency may be created by an express agreement or by implication (implied
agreement) or by ratification. Thus, there are different kinds of agency.

Express Agency

A person may be appointed as agent, either by word of mouth or by writing. No particular form
is required for appointing agent. The usual form of a written contract of agency is the power of
attorney on a stamped paper.

Implied Agency

Implied agency arises from the conduct, situation or relationship of parties. Implied agency,
therefore, includes agency by estoppel, agency by holding out and agency of necessity.

Agency by Estoppel

When a person has, by his conduct or statements, induced others to believe that a certain person is
his agent, he is estopped from subsequently denying it. The principal is precluded from denying
the truth of agency which he himself has represented as a fact, although it is not a fact.

Examples:
1. Prakash allows Anand to represent as his agent by telling Cooper that Anand is Prakash’s
agent. Later on, Cooper supplied certain goods to Anand thinking him to be Prakash’s
agent. Prakash shall be liable to pay the price to Cooper. By allowing Anand to represent
himself as his agent, Prakash leads Cooper to believe that Anand is really his agent.

2. Anand owns a shop in Serampur, living himself in Calcutta and visiting the shop
occasionally. The shop is managed by Bharat and he is in the habit of ordering goods from
Cooper in the name of Anand for the purposes of the shop and of paying for them out of
Anand’s funds with Anand’s knowledge. Bharat has an implied authority from Anand to
order goods from Cooper in the name of Anand for the purposes of the shop.

Agency by Holding Out

Though part of the law of estoppel, some affirmative conduct by the principal is necessary in
creation of agency by holding out.

Example: Puran allows his servant Amar to buy goods for him on credit from Komal and
pay for them regularly. On one occasion, Puran pays his servant in cash to purchase the goods.
The servant purchases good on credit pocketing the money. Komal can recover the price from
Puran since through previous dealings Puran has held out his servant Amar as his agent.

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