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Unit 9: Law of Agency

4. To communicate with the principal in case of diffi culty (s.214): It is the duty of agent, in Notes
case of difficulty, to use all reasonable diligence, in communicating with his principal and

in seeking to obtain his instructions. In case of emergency, however, the agent can do all
that a reasonable man would, under similar circumstances, do with regard to his own
business. He becomes agent by necessity.
5. Not to make any secret profi ts: Agent should deliver to the principal all moneys including
secret commission received by him. He can, however, deduct his lawful expenses and
remuneration.
6. Not to deal on his own account: Agent should not deal on his own account without fi rst
obtaining the consent of his principal. If he does so, the principal can claim from the agent
any benefit which he might have obtained.

Example: Pawan directs Amar, his agent, to buy a particular house for him. Amar tells
Pawan that it cannot be bought, but buys the house for himself. Pawan may, on discovering that
Amar has bought the house, compel him to sell it to Pawan at the price he bought.
Further, in case agent deals on his own account, he shall cease to be entitled for his
remuneration as agent.
7. Not entitled to remuneration for misconduct: Agent who is guilty of misconduct in the
business of agency is not entitled to any remuneration in respect of that part of the business
which he has misconducted.

Examples:
(i) Amar employs Bharat to recover ` 50,000 from Cooper and to lay it out on a good
security. Bharat recovers the amount and lays out ` 30,000 on good security, but lays out `
20,000 on security which he ought to have known to be bad whereby Amar loses ` 5,000.
Bharat is entitled to remuneration for recovering ` 50,000; and for investing ` 30,000. He is
not entitled to any remuneration for investing ` 20,000 and he must make good the ` 5,000
to Amar.

(ii) Amar employs Bharat to recover ` 10,000 from Cooper. Through Bharat’s misconduct
the money is not recovered. Bharat is not entitled to any remuneration for his services and
must make good the loss.

8. Not to disclose confidential information supplied to him by the principal.

9. To take all reasonable steps for the protection and preservation of the interests entrusted
to him when the principal dies or becomes of unsound mind (s.209).

9.4.2 Rights of Agent

Agent has a number of rights. These are:

1. Right to remuneration (Ss. 219-220): Agent is entitled to his agreed commission or
remuneration and if there is no agreement, to a reasonable remuneration. But the
remuneration does not become payable unless he has carried out the object of agency,
except where there is a contract to the contrary. When the object of agency is deemed to
have been carried out or the act assigned to the agent is completed would depend on the
terms of the contract. Further, the transaction for which the agent claims remuneration
should be the direct result of his services.

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