“Every agreement and promises enforceable bylaw is a contract. “Illustrate & explain
Introduction
The concept of agency was developed as one man cannot possibly every type of transaction himself. Agency is concerned with any principal-agent relationship: a relationship a person has legal authority to act for another. Hence he should have opportunity to transact business through another agent. Agency is special kind of contract. The Principal of contract of agency are – A) Expecting matters of personal nature, what a person can do him, he can also do it through agent .B) A person acting through an agent is acting himself, i.e. act of agent is act of Principal
AGENT:
An agent is a person who agrees to work on behalf of another person called principal. Agent can only work on behalf of principal on certain issues. An agent is person employed to do any act for another or to represent another in dealings with third party. An agent engaged with the principal to perform principal’s job, such as- selling goods, to manage business or to deal with third party. The principal expressly or impliedly authorizes the agent to work under his or her control or on behalf. An agent acts within the scope of authority which is delegated by the principal. Any person may become an agent. If a principal appoint an agent who is minor or unsound mind can he undoubtedly bring a contract between principal and third party but liability must be taken by principal.
Formation of agency:
A person does not become an agent on behalf of another merely because he gives him advice in matters of business. Agency is founded on contract, either expresses or implied by which one party confides to the other the management of some business to be transacted in his name or on his account. The essence of agency is that the principal authorizes the agent to represent him bringing or to aid in bringing, the principal into contractual relation with third party. An agency is the creation of contract entered into mutual consent between a principal and agent. By agency a principal grant authority to an agent to act on behalf and under the control of principal. The relation between a principal and an agent is fiduciary and agent action bind by the principal.[1]
1) Agency by Agreement
2) Agency by Estoppel
3) Agency by Necessity
4) Agency by Ratification
1) Agency by agreement :
Agency by agreement is also known as agency by authority. This agreement can be expressed or implied. An authority is said to be express when it is given words spoken or written. An authority is said to imply when it is to be inferred from the circumstances of the case. The actual authority depends on the construction of words of appointment This authority that an agent has to do everything that is necessary for or reasonably incidental to the effective execution of his duties as in Hely – Hutchinson v Brayhead.
2) Agency of ratification :
This arises when one ratifies or adopts the acts of another done without his knowledge or authority but on his behalf. “Where acts are done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority”. When ratified the principal is bound by the act whether it be for his detriment or for his advantage. The operation of the doctrine is illustrated by Bolton Partners v Lambert. Lambert made an offer to an agent of Bolton. The agent acted without authority and purported to accept the offer on Bolton’s behalf. Lambert then tried to revoke the offer but after this attempted revocation Bolton ratified his agent’s act. The court held Lambert was bound buy the contract, because Bolton’s ratification related back to the agent’s acceptance and therefore revocation was too late.
3) Agency by Estoppel :
This arises when a principal is estopped from repudiating the liability or obligation incurred by his agent acting on his behalf .Indian Contract act lies down thus – “When an agent has, without his authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induces such third persons to believe that such acts and obligations were within the scope of the agent’s authority.”[2] In leading case Soanes V L.S.W.R. the plaintiff entrusted to a porter wearing the uniform of defendant Railway Company. The luggage was stolen .The Railway Company wanted to avoid liability for the loss on the ground that the porter was off duty. But it was held that the porter was held out by the Company as agent authorized to receive luggage and as such the company was bound by his acts.
4) Agency by Necessity :
This arises when the exigency or peculiarity of circumstances renders it impossible for one to obtain authority from someone else on whose behalf he acts .A parent is an agent of necessity to arrange and prepare a marriage settlement of an infant child. The child need not be separately represented by an independent legal advisor (Tucker V. Bennet)
Dissolution of Agency:
A contract of agency is termed as general contract. Therefore an agency may terminate in the same way as a contract is discharged expect where the agency is irrevocable. In broad term an agency may terminated either by the act of parties or by the operation of law.
Indian contract act 1872, clearly mentioned different criteria to dissolve agency relationship. If a principal revoke the contract which has been signed between principal and agent must be terminated in accordance with the Indian contract act 1872. No exception can apply to terminate the contact. An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal adjudicated an insolvent under the provision of any Act for the time being in force for the relief of insolvent debtors.[3]
Termination of agency by the act parties in any of the following reasons:
1. By the act of parties
2. By the Operation of Law
Principal:
The principal is somebody who agrees to have somebody who can act on behalf of principal in certain issues. Principal instruct the agent whom he/ she appoint but principal cannot directly control or supervise the agent. A principal must have legal capacity (they are not insane or in certain circumstances a minor). Any person any person who is at the age of majority according to the law to which he is subject and who is of sound mind may employ agent. Persons, Corporations, Partnerships, Not-for-profit organizations and government can all be principals and appoint agent.
1. by the act of parties:
A. By revocation by the principal
Principal may revoke the agency at any point in time before the authority has been exercised and must be for just excuse. Revocation has however to be made subject to the following restriction. This restriction termed as irrevocable agency.
These are mentioned bellow:
I. When the agent has an interest in the subject-matter of the contract, his authority cannot be revoked so as to prejudice that interest. Where the agent has himself an interest in the property, which forms the subject matter of the agency, the agency in the absence of an express contract, cannot be terminated to the prejudice of such interest.
II. If the agent partially exercised his authority, the principal cannot revoke the authority the acts what agent has already done. The principal cannot revoke the authority given to his agent after the agency has been partly exercised so far as regard such acts and obligations as rise from acts already done in the agency.
III. If there is any express or implied contract exist then agency should be continued for any period in time. If any kind of revocation or renunciation of agency takes place then principal or agent must be compensated. In Indian Contract act it is clearly stated that, where there is an express o implied contract that agency should be continued for any period of time, the principal must take compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency for the sufficient cause.
B. The agent renounces the business of agency
Reasonable notice of such renunciation must be given. Renunciation can be made only for a just cause. If the renunciation is unwarranted or otherwise amount to a breach of contract, the principal is entitled to compensation.
2. Operation of Law:
I. By death or insanity of principal:
The relation between an agent and a principal is entirely personal. For this reason death or insanity of either terminates the agency subjects to the provision of Sec 202 and 204 of contract law 1872. In case of company, its winding up and in case of a firm, its dissolution has same effect.
II. By insolvency of the principal or agent:
A person who has been adjudged an insolvent cannot act as a principal because his contractual capacity has thereby lapsed. Hence all contracts of agency which he has made with others also are dissolved. Burt the insolvency of an agent does not terminate the agency.
III. Efflux of time:
When the agency is for fixed period of time, it terminates on the expiry of that time.
IV. The principal becoming an alien enemy:
If the principal and agent are from different countries and war breaks out between two countries, the contract of agency is terminated.
In above mentioned points it is clearly stated the reasons of dissolution of agency relationship between agent and principal based on expressed or implied contract. No exception can imply to nullify the contract other than these reasons in line with the Indian Contract Act 1872. If any principal revoke the contract without knowledge of agent It cannot affect the relationship .if we scrutinize all of the section in contact law 1872 we come out with that notion that agency relationship only terminate by two broad ways.
One is by act of parties and another is by the operation of law. First consider the act of
Parties under this segment principal can revoke the agency contract before agent exercise his or her authority. The revocation must be for just excuse. The revocation must be supported by the just and sufficient because otherwise agent must be compensated.[4] On the other hand before revoke the relationship reasonable notice must be given. If it is not the resulting damage must be made good to the one by the other.
Along with this, operation of law can be the reasons of termination of agency relationship. Death or insanity, efflux of time, insolvency of principal and if principal becoming an alien enemy. Above mentioned reasons are clearly indicating that no principal can terminate the relationship without the knowledge of agent.
In case of, fixed time frame contract terminated after expire of time. Before the scheduled date any termination attempt will not be affected. If contract take place between two people from different country and war breakout between two countries caused termination of agency relationship. So in any case, no principal can terminate the contract by ignoring the all of section regarding dissolution of contract of contract law 1872.
According to the, Indian contract Law 1872, revocation of authority cannot be affected before it’s known to agent and also to the third party.
Conclusion
Agency relationship is very important for running principal’s job in proper manner. Any
Malpractice in agency relationship caused serious damage both for principal and agent.
So it is maintained and regulated by contract law 1872. According to the law no principal can terminate the agent without the knowledge of agent. And before termination
Principal must notify his agent and must provide compensation. Eventually it can be
Said, under the umbrella of contract law 1872, both principal and agent are protected.
BIBLIOGRAPHY
1. Mofizul, P. i. (1963). Principles of Commercial Law. Dhaka: students Publication.
2. Sen, K., & Mitra, K. (1966). Commercial Law and Industrial Law. Delhi: world Press.
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5. About Us: Wikipediea,the free enccyclopedia. (n.d.). Retrieved february 12, 2012, from Wikipedia Website: http://en.wikipedia.org/wiki/Agency_%28law%29
6. About Us: The Lawyers & Jurists. (n.d.). Retrieved February 10, 2012, from The Lawyers & Jurists Web site: https://www.lawyersnjurists.com/resource/course-materials/business-law/contract/
7. About Us: The Lawyers & jurists . (n.d.). Retrieved February 12, 2012, from The Lawyers & jurists web site: https://www.lawyersnjurists.com/resource/course-materials/page/4/
8. About Us: Legal Match, Find the Right Lawyer Now. (n.d.). Retrieved February 12, 2012, from Legal Match, Find the Rright Lawyer Now Web site: www.legalmatch.com/law-library/article/termination-of-an-agency-relationship.html
9. About Us: LegalMatch, Find Right Lawyer Now. (n.d.). Retrieved February 12, 2012, from LegalMatch web site: http://www.legalmatch.com/law-library/article/agency-relationship.html
10. About Us:US LEGAL,INC. (n.d.). Retrieved February 15, 2012, from US LEGAL,INC Web site: http://agency.uslegal.com/rights-duties-and-liabilities-between-principal-and-agent/
[1] Andrews V Schram,562N.W.2d50 (Neb1997)
[2] Indian Contract Act 1872 sec 237
[3] Indian contract Act 1872 sec201
[4] Where there is an expressed or implied contract that they should be continued for any period of time ,the principal must make compensation to the agent or the agent ton principal , as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.-Indian contract act 1872,sec205