Duties and Rights of Agent and Principle

In a contract of agency, the principal appoints an agent to perform some specific task or business on his behalf. The principal is bound by the acts of his agent and is thus, responsible for his acts to the third parties. Let us now understand the Rights and Duties of Agents.

Rights of Agents

1. Right to Remuneration

As per section 219, an agent has a right to receive the agreed remuneration or in absence of agreement, a reasonable remuneration for rendering the services to the principal that are not voluntary or gratuitous. He becomes eligible to receive the remuneration as soon as he completes the work that he undertook.

2. Lien on Goods

Some agents who have the possession of goods, securities or properties of their principal also have a lien on these goods, securities or properties regarding their remuneration and also for any expenses or liabilities that they incur. When he is an unpaid seller, he has a right to stop the goods in transit.

3. Right to be Indemnified

An agent represents his principal to the third parties. As per sections 222 and 223, an agent has a right to be indemnified by his principal for all charges, expenses, and liabilities that he incurs during the course of the agency.

Duties of Agents

A principal has a right to sue his agent for damages in case of breach of duty by the agent. The duties of agents are:

  1. As per section 211, an agent shall act within the scope of authority that his principal confers upon him. Also, he shall strictly follow the directions of his principal. However, in the absence of express instructions from his principal, he shall follow the custom prevailing at the place where he carries out his business, in a similar type of business.
  2. Section 212 states that he shall work with reasonable skill and diligence. Also, where the nature of the agent’s profession requires him to possess a special skill, he shall exercise the skill that a member of that profession will exercise.
  3. An agent shall disclose properly any material information to his knowledge to the principal that can influence the making of the contract.
  4. As per section 213, an agent shall is under the duty not to disclose any confidential information of his principal.
  5. Section 215 states that an agent shall not compete with his principal. In other words, his interest shall not conflict with his duty.
  6. It is the duty of the agent to keep true and fair accounts and prepare them on a reasonable notice to render them.
  7. An agent shall not make any secret profit and shall disclose any extra profit he makes to the principal. Where the principal finds that the agent is making secret profits, he may dismiss the agent without notice, recover the amount of profit and also refuse to pay him his remuneration. He may also repudiate a contract where a third party is also involved in the fraud and recover the damages.
  8. He shall not appoint a sub-agent.

Exceptions to the principle of Delegates non-protest delegate

The above principle means that a delegate cannot further delegate. Therefore, an agent cannot appoint a sub-agent. However, there are the following exceptions to this principle:

  1. When the principal allows delegation.
  2. Where it is the custom or usage of trade to delegate.
  3. When delegation is necessary for proper and efficient performance.
  4. Where it becomes essential due to some emergency
  5. When the principal knows that the agent’s intention is to delegate.
  6. Where the work is ministerial.

Rights and Duties of the Principal

The agent’s duties are principal’s right and agent’s rights are principal’s duties.

Termination of Agency

Agency may be terminated by any of the following ways.

By Act of Parties

  1. By agreement between the principal and agent: In some cases contract of agency itself may contain provisions as regard the termination of agency. They may be express or implied, which may be inferred from the circumstances of the case and terms of the contract.
  2. By revocation of agency by the principal: Principal may either expressly or impliedly, after giving reasonable notice, revoke the authority of the agent before it has been exercised by the latter so as to bind the former (Sec. 207).

Example: A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority.

Principal shall have to pay compensation to the agent for any earlier revocation of his authority without sufficient cause before the period for which it was given to him.

Irrevocable agency: However, the principal will not be entitled to revoke the authority of the agent in the following circumstances.

(i) Where the agency is coupled with interest: An agency where the agent himself has an interest in the property which form the subject matter of agency is said to be agency coupled with interest. Such an agency cannot be revoked.

Example: A gives authority to C to sell A’s land and to pay himself out of the proceeds the debt due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.

(ii) Where authority has been partly exercised by the gent: If the authority has partly been exercised by the agent, the principal cannot revoke the authority of the agent so far as regards such acts and obligations as arise from acts already done in the agency (Sec. 204).

Example: A asks B, his agent, to pay out of A’s funds a sum of Rs. 1,000 to C in two equal installments. By a subsequent letter A revokes B’s authority. Before this revocation B had already paid a sum of Rs. 500 to C. A is bound by this payment.

(iii) Where agent has incurred personal liability: Where the agent has purchased bounds in his personal name for the principal has thereby made himself personally lilable, the principal cannot revoke agent’s authority.

Example: A authorised B to buy 1,000 bales of cotton on account of A and to pay for it but of A’s money remaining in B’s hands B buys, 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authority so far as regards payment for the cotton.

  1. By renunciation of business by the agent: Agent, after giving reasonable notice to the principal, may renounce the business of agency. In case the contract of agency is enterest into for a fixed period, agent shall have to pay compensation to the principal for his earlier renunciation of the business of agency.
  2. By insolvency of the principal: The contract of agency will come to an end when the principal becomes insolvent and the fact of his insolvency comes to the knowledge of the agent. As against third persons, the agency will terminate when it comes to their knowledge. Insolvency of an agent will not lead to the termination of the contract of agency.
  3. Destruction of the subject matter of the contract of agency: The contract of agency will come to an end when the subject matter of the agency will come to an end or when it ceases to exist or when the principal is deprived of his powers on the subject matter of the contract of agency.
  4. Principal becoming an alien enemy: Breaking out of war between two countries in one of which resides principal and in the other resides the agent, shall cause the termination of the authority of an agent.

When termination of agent’s authority takes effect as to agent, and as to third person: The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or so for as regards third persons, before it becomes known to them. (Sec. 208).

Agent’s duty on termination of agency by principal’s death or insanity when an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him (Sec. 209).

Termination of sub-agent’s authority: The termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent’s authority) of the authority of all sub-agents appointed by him (Sec. 210).

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