Page 61 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 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.

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.

3.3.2 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 agencies.

Express Agency (S.187)

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.

Implied Agency (S.187)

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.

Agency by Estoppel (S.237)

When a person has, by his conduct or statements, induced others to believe that a certain person
is his agent, he is estopped from subsequently denying it. The principal is precluded from
denying the truth of agency which he himself has represented as a fact, although it is not a fact.

Examples:
1. Prakash allows Anand to represent as his agent by telling Cooper that Anand is
Prakash’s agent. Later on, Cooper supplied certain goods to Anand thinking him to
be Prakash’s agent. Prakash shall be liable to pay the price to Cooper. By allowing
Anand to represent himself as his agent, Prakash leads Cooper to believe that Anand
is really his agent.

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