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Mercantile Laws-I




                    Notes          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.

                                   9.1.1  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 artificial person and thus can transact business only through
                                   agent.
                                   9.1.2  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.


                                         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.

                                   9.2 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.
                                   9.2.1  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.

                                   9.2.2  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.








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