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This article is written by Sainikitha.OL of School of Excellence in Law, TNDALU.

INTRODUCTION

These days works are being delegated as it is not feasible and possible for any person to carry forward all their responsibilities at once. Hence, the emergence of agency allows a person to delegate the contractual duties to another person through a contract of agency governed by the Indian Contracts Act, 1882.

An agent is a person who is appointed to do any act for another person and also to represent such person in dealing with third persons or parties. The distinguishing factor between an agent and any other person appointed to do an act is the powers, duties, rights and liabilities vested to an agent through the Indian Contracts Act, 1882. The principal appoints an agent to represent himself and act on his behalf when entering into a contractual relationship with third parties. To avoid potential conflicts between agent and principal, the Act poses certain rights, duties and responsibilities to both the principal and the agent.

DUTIES OF AN AGENT

“An agent, while carrying out his designated duties, must act in the best interest of his principal, and not in his own personal interest”

The following are the general duties of an agent imposed by law upon each agent which are stated as follows,

  1. Due to execute the mandate of the principal: The foremost duty of any agent is to carry out the mandate passed by the principal. Any failure by the agent attracts absolute liability for the loss faced by the principal.
  2. Duty in conducting the principal’s business (S. 211): An agent must carry out the said business as per the directions given by the principal. If no such directions are made, then general customs which prevails in doing business of same kind has to be carried out.
  3. Duty of reasonable care and skill (S. 212): The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal to use such skills he possesses; and to make compensation to his principal in respect of direct consequences of his own neglect, want off skill or misconduct.
  4. Duty to communicate to the principal (S. 214): It is the essential duty of an agent, in cases of difficulty, to use all reasonable diligence of communicating with his principal, and in seeking to obtain his instructions.
  5. Duty not to make secret profit: It is the duty of the agent to not to make any form of secret profit in the business of agency. The relationship between agent and principal is of fiduciary in nature and thus requires absolute good faith in the conduct of agency.
  6. Duty to remit sums (S. 218): The agent is bound and responsible to meet the payments to the principal for all sums he received on his account. However, the agent is permitted to deduct his lawful charges. The principal’s money must be remitted even if such money has been received in pursuance of a void or illegal contract.
  7. Duty to maintain proper accounts (S. 213): An agent is responsible to render proper accounts to his principal whenever demanded by him. There is no provision in the Indian Contracts Act, 1882 enabling an agent to institute a suit for accounts against the principal. The Supreme Court held that the provisions of the Contracts Act are non-exhaustive in this regard and that the right of an agent to sue the principal for accounts is an equitable right arising under special circumstances.
  8. Duty not to delegate (S. 190): The well-known legal maxim of delegatus non potest delegare applies to the law of agency. Ordinarily, the agent cannot further delegate the work which has been delegated to him by the concerned principal. In John McCain and Co v. Pow, it was held that unless so authorized by the principal, an agent has no implied right to appoint a sub-agent and delegate to him his own powers which require special skill and care. But there are few exceptional cases where the agent may delegate the work to another.
  • Nature of work
  • Trade custom
  • Principal’s consent

Sub agent: A person who is employed by and acting under the control of, the original agent in the course of business of agency. The relationship between principal, agent and sub-agent depends upon the way in which such sub-agent has been appointed, whether proper or improper appointment decides such relationship.

RIGHTS OF AN AGENT

  1. Right to remuneration (S. 291): Every agent is entitled to his agreed sum of remuneration.
  2. Right to retainer (S. 217): The agent has the right to retain the principal’s money until claim is made. This right shall be exercised on “any sums received on account of the principal in the business of the agency”.
  3. Right to lien (221): The agent is vested with the rights to retain goods, papers, and other property which could be both movable and immovable, until the due amount to him for commission, disbursements and services in respect of the same has been paid or accounted for to him.
  4. Right to indemnity (S. 222-223): The right of indemnity extends to all losses and expenses incurred by the agent in the conduct of the business. The agent must have been damnified in the lawful conduct of the business. In cases where the act done based on the instructions of the principal is apparently lawful but turns out to be unlawful or injurious to a third person, the agent is then entitled to indemnity against the consequences of the act.

RIGHTS OF PRINCIPAL

  1. Right to performance: The principal is entitled to expect the performance of assigned task by the agent as stated in the contract of agency. Thus, the principal shall make legitimate expectation upon the performance of the instructed task from his agent.
  2. Right to damages: The principal shall seek the required damages from the agent for the alleged misconduct and losses incurred. The principal is entitled to compensation.
  3. Right to information: The principal shall seek relevant information from the agent regarding the progress of the tasks so assigned to him by the principal.
  4. Right to terminate the agency: The principal has the right and authority to terminate the contract of agency upon the existence of reasonable grounds.

DUTIES OF THE PRINCIPAL

  1. Duty to co-operate: Since, the relationship between principal and agent is of fiduciary in nature, it is an implied duty of the principal to cooperate with his agent and allow them to carry out the task assigned without any unnecessary hindrances on the part of the principal.
  2. Duty of honesty: The principal shall remain honest to his agent about the conduct of the business and maintain transparency when assigning works and duties to the agent.
  3. Duty of payment: It is fair on the part of principal to pay his agents for the works done by them on behalf of the principal. Such payments shall be fair and reasonable for the task enforced by the agent based on their contractual relationship.

CONCLUSION

An agency is a contract of employment which aims to bring the principal into legal relations with a third party. For the same, he is represented by an agent acting on his behalf which is widely governed by the Indian Contracts Act, 1882. The relationship between agent and principal is of fiduciary in nature and thus there shall always exist certain well written rights and duties of both which would bring yield to the formation and existence of agency agreement. The agent’s actions bind the principal. Both principal and agent carry myriad duties on their shoulder in their pursuit to bring yield to the contract of agency.

REFERENCES

1. Blog ipLeaders, Rights and Duties of an Agent- https://blog.ipleaders.in/rights-duties-agent/

2. Law Bhoomi, Who are Agents and Rights and Duties of Agents- https://lawbhoomi.com/rights-duties-of-agents/


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