Duties & Rights of Agent: Indian Contract Act 1872

An agency agreement creates a legal connection between the agent and the principal. It ensures that both parties understand their duties and obligations in a contract, which promotes mutual knowledge that the agent is obligated to the principal for activities performed within his scope of power. The contract of agency also provides the rights and responsibilities of an agent in a contract of agency, and it also describes the circumstances. In business, an agent is someone who performs activities or makes decisions on behalf of another person, known as the principal.

Geeky Takeaways:

• Contracts of agency are quite common in business since companies employ the services of agencies to extend their operations while simultaneously focusing on their core businesses.
• Examples include hiring a human resources expert to recruit personnel or attorneys for legal representation, as well as using the services of a stockbroker.
• Sections 182 to 238 of the Indian Contract Act, 1872, cover laws relating to agency contracts.
• Agents represent others, known as principals, by managing duties or making choices on their behalf.
• There are several categories of agents, including general, special, and universal agents, as well as mercantile agents for commercial operations and non-mercantile agents for non-commercial purposes.

Duties of an Agent under Indian Contract Act

1. Duty Not to Delegate His Authority: Agents have a duty not to assign their authority to sub-agents. Section 190 of the Indian Contract Act 1872 is founded on the maxim Delegatus non-protest delegare, which states that a delegate cannot further delegate. An agent assigned to work on a certain job cannot transfer that task to another since the principal selects a specific agent. After all, he reacts with trust and faith in such a person.

2. Duty to Keep and Protect the Interest: Section 209 of the Indian Contract Act states that when the principal’s death or unsoundness terminates the agency, the agent must maintain and protect the interests entrusted to him on behalf of the deceased principal’s representative.

3. Duty to Execute the Mandate: Section 211 of the Indian Contract Act requires an agent to handle his principal’s business in accordance with the principal’s instructions or, in the absence of the principal, according to trade customs.

4. Duty to Act with Care and Skill: Section 212 of the Indian Contract Act addresses another duty of the agent. This law requires agents to handle agency business with care and prudence.

5. Duty to Render Proper Accounts: Section 213 of the Indian Contract Act defines the following position: On demand, the agent shall present to the principal the necessary accounts. It also requires the agent to maintain the principal’s money and property separate from his own. The agent is responsible for keeping correct records of the property received as part of his responsibilities and giving them to the principal upon request.

6. Duty to Communicate with the Principal: Section 214 of the Indian Contract Act states that in times of difficulty, it is the agent’s responsibility to communicate with his principal and seek his directions.

7. Responsibility not to make a secret profit: The agent-principal relationship is based on mutual trust and confidence. If an agent makes a covert profit from its agency, the principal has the right to claim the entire profit. Section 216 of the Indian Contract Act states that agents must not profit or gain any benefit from their agency without the knowledge and approval of their principals. Such profit is referred to as “secret profit.” It is the agent’s job to answer to the principal about any hidden earnings.

Rights of an Agent under Indian Contract Act

1. Right to Remuneration: Under Section 219 of the Indian Contract Act, agents are entitled to retain any funds received on behalf of the principal in a commercial transaction, as well as advances provided or expenditures legitimately spent while doing business for the principle.

2. Right to Indemnity: Section 222 of the Indian Contract Act requires the principal to indemnify the agent for the consequences of any legitimate activities performed by the agent in the exercise of the power delegated to him.

3. Right to Reimbursement: Section 225 of the Indian Contract Act provides for reimbursement to the agent in the case of harm or loss caused by a principal’s lack of ability or competency.

4. Right of Retainer: According to Section 217 and 218 of the Indian Contract Act, the agent has the right to retain any sums received on behalf of the principal in the agency’s business. This includes remuneration, advances, and expenses incurred in conducting the business.

5. Right of Lien: A lien is the right to maintain possession of another person’s property until a debt owed by that person is discharged. Section 221 of the Indian Contract Act states that if the agent is not paid legitimate charges, remunerations, or expenditures by his principal and the commodities are in his control. He may detain the things until the principal has paid the authorized charges. 

• Only applies if there is no contract, 
• If the agent has legitimately obtained possession of the property,
• If the agency is expecting payment for the property.

Conclusion

The contract of agency is one that the principal and agent agree into with their mutual consent. The principle provides an agent authority to operate on his behalf and under his supervision by using an agency contract. Both parties to the contract have a fiduciary relationship, and the agent’s acts bind the principal. As a result of the agency contract, the agent is assigned certain rights and responsibilities. An agent has numerous rights and obligations. Some of the rights include payment, indemnity, retainer, lien, and compensation. Furthermore, the obligations include following orders or conventions, not delegating his tasks, avoiding conflicts of interest, maintaining accounts, and exercising reasonable care and competence.

Duties and Rights of an Agent- FAQs

Can an agent sign contracts for the principal?

Yes, agents may enter into contracts on behalf of the principal as long as they have the power to do so within the restrictions established by the principal.

What happens if an agent exceeds their authority?

If an agent exceeds their power, the principal may be under no obligation to respect the contract formed by the agent. The agent may also be held personally liable for any related damages.

Can the principal cancel the agent’s authority?

Yes, the principal may revoke or cancel the agent’s authorization at any moment, as long as it is done in line with the provisions of the agency agreement or applicable legislation.

How does one create a genuine agency relationship?

A proper agency relationship requires mutual agreement between the principal and the agent, a clear explanation of the agent’s authority, and consideration of any legal obligations. It is essential to document the connection in writing to avoid misunderstandings.

What is a sub-agent?

A sub-agent is a person appointed by the original agent to conduct agency business under his direction and supervision and who is accountable to the principal for the actions of a sub-agent.

Note: The information provided is sourced from various websites and collected data; if discrepancies are identified, kindly reach out to us through comments for prompt correction.