Monday, July 24, 2017

Business law concept contract of agency-MBA Material

Modern business is become a complex day by day. As such it is not possible for a person to carry on all business transaction himself. He has to delegate some of his duties and powers to another person.
The person who acts on behalf of another or who has been delegated an authorities is called an agent. The person who authorizes another to act is called a principal and agent is called an agency. The law of agency is based on the principle “want a person day by another, he does by himself”.
Section 182 of a Indian contract act defines an agent is a person employed to do any act for another or to represented is called the principal. The function of the agent is to bring his principal into contractual relationship with third person. The agent is a connecting link between the principal and the third party.
Ex: if your father asks you to deposit money in the bank, your father as a principal and you acts as a agents.
What is Agency:
            Agency is the relationship which exists between an agent and his principal to bring the principal in to legal relationship with a third party. The relationship between the agent and the principle is called agency.
Nature / essential of agency:
1.       Agreement between the principal and the agent
2.       Intention of the agent to act on behalf of the principal
3.       Competency of principal
4.       Consideration is not necessary
5.       Authority of principal
Creation of agency:
            The relationship between principal & agent (agency)may be created by
1.       By express agreement
2.       By implied agreement
3.       By ratification
4.       By operation of law
By express agreement By express agreement:
            A contract of agency may be created by an express agreement. The agreement may be mode orally or in writing. In fact in a large number of business dealings agencies are created by a letter document or deed in writing. The usual form of a written contract of agency is known as “power of attorney”. The power of attorney gives the agent to act as an agent on the behalf of the principle in the accordance with the terms and conditions mention in the contract.
By implied agreement:
            A contract of agency may be created by implied agreement, it may be implied under certain circumstances from the conduct of the parties, situation, relationship of the parties.
Ex: partners, servants, wife these are the examples for implied agencies which arises from the relationship, situation, conduct both the parties.
By ratification (confirmation):
            An agent may act on the behalf of the principal either with or without his authority. Acts performed by an agent beyond the scope of his authority are not binding upon the principal. In such a case the principal may either adopt or reject the act of the agent. If the act is rejected their is no agency and the person acting as an agent is personally liable. In case the principal adopt the act of the agent done without his authority he is said to have ratified that act.
Classification of agents or kinds of agent:
                                                          Agent

Classification on the basis of                      classification on the basis o
Authority                                   nature of work performed by the agent
          Authority                               factor
specific agent                                   auctioneer
general agent                                   broker
universal agent                      commission agent
                                                          banker
Specific agent:
            A special agent is one who is appointed to perform a particular act of to represent his principle in some particular transaction.
Ex: a agent employed to sell a house.
            A agent employed to bid to an auction such an agent an limited authority and as soon as the act is performed, his authority comes to an end he cannot bind his principle in any matter other than for which he is employed.
General agent:
            A general agent is one who has authority to do all acts connected with a particular trade or business of employment for examples the manager of the company the principle of an educational institution.
            He is a general agent of an firm/organisation who has implied authority to bind his principle by doing any thing necessary for carrying on the business such authority of an agent is continues until the organisation is put it an end.
Universal agent:
            An universal agent is one whose authority to act for the principle is unlimited. He has authority to bind his principle by any act which he does provided that act is legal agreeably by the law.
Factor:
            A factor is and mercantile agent entrusted with the possession of goods for the purpose of selling them. With the consent of the owner any sale disposition of them made by him.
Auctioneer:
            An auctioneer his an agent appointed by a seller to sell his goods by public auction. It is for a reward which is generally in the firm of commission he is primarily the agent of the seller after the sale has taken place he becomes the agent of purchaser also.
Broker:
            A broker is an agent who is employed to buy or to sell goods on behalf one another he is employed primiarly to bring about a contractual relationship between the principal and the third party. He has no possession of the goods, he has no right of lien.
Commission agent:
            He is employed to buy land & sell goods or transact the business for other persons for which he receives commission in the form of money for his labour and trouble.
Banker:
            The relationship between a banker and customer is that of debtor and creditor there is an obligation of the party of the banker to pay D.D cheque of the customer here the customer is principle and the banker is his agent.
Duties of an agent:
1.       To carry out the work under taken according to the directions given by the principal.
2.       To carry out the work with reasonable care skill, diligence.
3.       To rendered proper accounts to the principal.
4.       To communicate with the principal in case of difficulty
5.       Not to deal on his own account
6.       To pay sums receives for the principal in the principal account
7.       To protect and preserve the interest of the principal in case of death or insolvency.
8.       Not to use information obtained in the course of agency against the principal.
9.       Not to make any secret profit from agency.
10.    Not to setup an adverse title(title means procession)
11.    Not to delegate his authority(not appoint the sub agents)
Rights of an agent:
1.       Right of retainment
2.       Right to receive remuneration
3.       Right of lien
4.       Right of indemnification
5.       Right of compensation
Right of retainment:- opposite of return
            Retain means (keep possession of) the agent may retain some money which is due to himself in respect of his remuneration, advances, expenses which are incurred by him in conducting the business.
Right to receive remuneration:
            The agent is entitled to get his remuneration according to the contract.
Right of lien:
            Lien means the right to hold others property until the debt is paid.
The agent is entitled to retain goods, papers movable, immovable property of the principle until the amount due to himself.
Right of indemnification:
            Indemnification means compensation for damage or losses the agent will be indemnified against to the consequences of all the lawful done by him by the principle.
Right of compensation:
            The agent has a right to be compensate for injures sustained by him by neglect on the part of the principal.

Duties and rights of principal:
Duties of principal:
            The duties of a principal towards the agents are
The rights of the agent against the principal
The principal owns the following duties to an agent those are
1.       To indemnify the agent against the consequences of acts done in good-faith
2.       To indemnify the agent against the consequences of all lawful acts.
3.       To indemnify the agent for injury caused by principal negligence
4.       To pay the agent the commission and other remuneration agreed in the contract of agency.
The duties of a principal=rights against the agent
Rights of a principal:
            The duties of an agent are the rights of the principal indirectly when an agent fails in his duty towards the principal, the following rights (remedies) against the agent.
1.       To recover damage
2.       To obtain an account of secret profits.
To recover damage:
            If the principal suffers only loss due to disregard by the agent by not following the custom of trade negligence on the part of the agent, then he can recovers damages from the agent
To obtain an account of secret profits:
            If the agent without knowledge of the principal makes any secret profit out of agency the principal has right to recover them from the agent.
Personal liability of the acts of the agent:
Where the principal name and existence are disclosed by the agent then
1.       The acts of the agent are the acts of the principal
2.       When the agent exceeds his authority to do work of the principal, the principal is bound by that part of the work
3.       Notice given to an agent is notice given to the principal
4.       Misrepresentation or fraud of agent, the principal is liable for the misrepresentation made for the fraud committed by the agent in the course of the  business for the principal
Personal liability of the agent:
            The agent is personally liable in the following cases:
1)when the contract expressly provides that the principal would hold the agent personally liable in case of breach of contract the agent is personally liable.
2) when the agent act for a foreign principal, the agent is personally liable
3)where the agent acts for an end undisclosed principal is personally liable
4)where the agent acts for a principle who can not be sued, incompetent to enter in to a contract, minor, idiot, insolvent, lunatic etc..
5)where he sign a contract in his own name
6)where he acts for a principal we not in existence
7)where he receives pays money by mistake of fraud
Termination of agency: revocation a reasonable notice
                             Termination of agency

By acts of the parties                                         by operation of law
Mutual agreement                                    performance the contract
Revocation by the principal                                      becomes impossible
Revocation by the agent                                     expiry of time
                                                                              Death or insanity of p/a
                                                                              insolvency
                                                                              principal becoming an
                                                                                      alien enemy
                                                                       dissolution of a company

          destruction of subject
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