Page 66 - DMGT407Corporate and Business Laws

Unit 3: Contracts of Bailment and Agency

by or responsible for the acts of such a sub-agent. The sub-agent can only bind the agent by Notes
contracts entered into with third parties.
Where agent appoints or names another person for being appointed as agent in his place, such
person is called a substituted agent (s.194).

Examples:
1. Amar directs Bharat, his solicitor, to sell his estate by auction and to employ an
auctioneer for the purpose. Bharat names Cooper, an auctioneer, to conduct the sale.
Cooper is not a sub-agent, but is Amar’s agent for the conduct of the sale.
2. Amar authorises Bharat, a merchant in Kolkata, 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.

Self Assessment

Fill in the blanks:
7. A ……………..agent is a person appointed to do some particular act or enter into some
particular contract.
8. Where agent appoints or names another person for being appointed as agent in his place,
such person is called a …………………agent

3.5 Duties and Rights of Agent

3.5.1 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:
(a) 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.
(b) 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.
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).

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