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Unit 12: Law of Agency

An auctioneer is agent appointed to sell goods by auction. He can deliver the goods only on Notes
receipt of the price. An auctioneer can recover the price from the highest bidder (i.e., the buyer)
by fi ling a suit in his own name. In any case, an auctioneer can sell only by public auction and
not by a private contract. His position differs from a factor inasmuch as the auctioneer has a
particular lien, whereas the factor has a general lien.
Though the relationship between banker and customer is ordinarily that of debtor and creditor,
he acts as his agent when he buys or sells securities on his behalf. Similarly, when he collects
cheques, bills, interest, dividends, etc., or when he pays insurance premium out of customer’s
account, as per customer’s mandate, he acts as his agent.
A Pakka adatia is a person who guarantees the performance of the contract, not only to his
principal but also to the broker (shroff) on the other side. A peculiarity of pakka adatia is that
he can himself perform the contract instead of offering it to the third party. A Katcha Adatia, on
the other hand, does not guarantee the performance of the contract. However, he guarantees the
performance on the part of the principal. Thus, he will be responsible to the other broker or shroff
who contracts on behalf of the other party, in case of non-performance by his principal.
An indentor is a commission agent, who for a commission, procures a sale or a purchase on
behalf of his principal, with a merchant in a foreign country. Such agent gets commission at the
rates mentioned in the indent.

Non-mercantile or Non-commercial Agents

Some of the agents in this category are: wife, estate agent, counsels (advocates), attorneys. The
following principles provide guidelines as regards wife as agent of her husband:
1. If the wife and husband are living together and the wife is looking for necessaries, she is
agent. But this presumption may be rebutted and the husband may escape liability if he can
prove that
(a) he had expressly forbidden his wife from purchasing anything on credit or from
borrowing money,
(b) goods, purchased were not necessaries,
(c) he had given sufficient money to his wife for purchasing necessaries, or

(d) the trader had been expressly told not to give credit to his wife.

2. Where the wife lives apart from the husband, through no fault of hers, the husband is liable
to provide for her maintenance. If he does not provide further maintenance, she has an
implied authority to bind the husband for necessaries, i.e., he would be bound to pay her

bills for necessaries. But where the wife lives apart under no justifiable circumstances, she
is not her husband’s agent and thus cannot bind him even for necessaries.
Sub-agent and Substituted Agent

The general rule is that agent cannot appoint agent. The governing rule is enshrined in a
maxim ‘a delegate cannot further delegate’. Agent being a delegate cannot transfer his duties
to another. The principle underlying the rule is that the principal engages agent ordinarily on
personal consideration and thus may not have the same confidence in the person appointed by

the agent. Hence, sub-agency is not generally recognised. However, deals with the circumstances
as to when and how far agent can delegate his duties. Agent may appoint agent in the following
circumstances:
1. where expressly permitted by the principal;
2. where the ordinary custom of the trade permits delegation;

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