Page 119 - DMGT102_MERCANTILE_LAWS_I

Unit 9: Law of Agency

9.9 Summary Notes
9.10 Keywords
9.11 Self Assessment
9.12 Review Questions

9.13 Further Readings

Objectives

After studying this unit, you will be able to:

z Define agency and agent
z Explain different kinds of agencies
z Discuss right and liability of agent and principle
z Describe termination of agency and its modes

Introduction

In the previous unit, you came to know about the bailment and guarantee of contract. In this unit
you will study about the contract of agency.
Before the Industrial revolution, business was carried on largely by individual artisans in their
homes and in small family operated shops. As population and trade expanded and division of
labour and specialisation became the order of the day, there arose the problem of distribution
of goods. To meet the rising demand, manufacturers and shopkeepers began to hire others to
work for them. These helpers or “servants” as they were called performed whatever physical
tasks were assigned to them, under the close personal supervision of the “master”. The Indian
Contract Act, 1872, makes provisions as regards agency. Secs.182 to 238 deals with the subject of
agency.

9.1 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.

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