Page 126 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 2. Amar authorises Bharat, a merchant in Calcutta, to recover the money due to Amar from
Cooper and Co. Bharat instructs Dalip, a solicitor to take proceedings against Cooper and
Co. for the recovery of the money. Dalip is not a sub-agent but is a solicitor for Amar.

9.4 Duties and Rights of Agent

9.4.1 Duties of Agent

The duties of agent towards his principal are:
1. To conduct the business of agency according to the principal’s directions (s.211): The duty
of the agent must be literally complied with, i.e., the agent is not supposed to deviate

from the directions of the principal even for the principal’s benefit. If he does so, any loss
occasioned thereby shall have to be borne by the agent, whereas any surplus must be
accounted for to the principal.

Examples:
(i) Anil is directed by his principal to warehouse the goods at a particular warehouse. He
warehouses a portion of the goods at another place, equally good but cheaper. The goods
are destroyed by fire. Anil, the agent, is liable to make good the loss.

(ii) A principal instructs his agent to deliver goods only against cash but the agent delivers
them on credit. In such a case, the agent would be liable for the price which the purchaser
fails to pay.
In the absence of instructions from the principal, however, the agent should follow the
custom of the business at the place where it is conducted.

Example: Amar, agent, engaged in carrying on for Bharat a business in which it is the
custom to invest from time to time, at interest, the money which may be in hand, omits to make such
investment. Amar must make good to Bharat the interest usually obtained by such investment.
2. The agent should conduct the business with the skill and diligence that is generally
possessed by persons engaged in similar business, except where the principal knows that
the agent is wanting in skill (s.212).

Examples:

(i) Where a lawyer proceeds under a wrong section of law and thereby the case is lost, he
shall be liable to his client for the loss.
(ii) Amar, agent for the sale of goods, having authority to sell on credit, sells to Bhagat
on credit, without making the proper and usual enquiries as to the solvency of Bhagat.
Bhagat, at the time of such sale, is insolvent. Amar has to compensate his principal in
respect of any loss thereby sustained.
(iii) Amar, an insurance broker, employed by Bharat to effect an insurance on a ship, omits
to see that whether the usual clauses are inserted in the policy. The ship is afterwards
lost. In consequence of the omission of the clauses nothing can be recovered from the
underwriters. Bharat is bound to make good the loss to Amar.

3. To render proper accounts (s.213): The agent has to render proper accounts. If the agent
fails to keep proper accounts of the principal’s business, everything consistent with the
proved facts will be presumed against him. Rendering of accounts does not mean showing
the accounts, but maintaining proper accounts supported by vouchers.

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