Agency-Industrial Law and Finance- Lecture-2

Subject: Industrial Law and Finance

Subject Code: HUM4603

Topic: Agency- lecture no-2

Lecturer: Md. Ridwanul Hoque

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AGENCY

An agent is a person who acts on behalf on another, known as the principal.

The agent enters into binding contracts with other persons (third parties) on behalf of the principal. The agent is simply a mechanism through which the principal acts.

The agent is not personally bound and drops out once the agreement between the principal and the third party has been reached.

1. Formation of the relationship

An agency agreement can be written or oral or implied from conduct or relationship. The agency agreement must be in the form of a deed if the agent is given express authority to execute deeds for his principal.

Existence of express terms of the agreement which directly or by implication refers to the agent as receiving remuneration makes the relationship contractual. Many agents act without any remuneration i.e out of gratitude or friendship (gratuitous agents). In these circumstances the agent will owe the principal all the duties normally owed to a principal.

Every employee is an agent of his employer in the course of his work. A dishonest employee prejudices his own position in terms of the employer/employee relationship but the principal can be bound by the misconduct of his employees. Agents are not employees but independent contractors, with a contract for services rather than of service.

2. Types of agent

2.1 Universal agent

 This agent is appointed to handle all the affairs of his principal and has unlimited authority to act for the principal in any capacity.

2.2 General agent

This agent has authority to represent his principal in the business of a particular kind, e.g. to manage a shop. The principal will be liable of acts done by the agent within the scope of usual authority unless he has expressly forbidden such acts and given notice to third parties likely to be affected.

2.3 Special agent

This agent has authority to act only on a particular occasion e.g. buy a particular article for the principal.

2.4 Del credere agent

This agent undertakes responsibility for the performance of contracts by people whom he introduces to the principal e.g. a commission agent who agrees to guard his principal against loss from sales on credit.

2.5 Mercantile agent

This agent has authority in the course of business as agents to sell, consign goods for sale, buy goods or raise money on the security of the goods.

2.6 Commercial agents

These are self employed intermediaries who have a continuing authority to negotiate the sale or purchase of goods on behalf on the principal.

The agent must be paid commission on repeat order even where the agent was not responsible for the order.

3. Termination of agency

3.1 Termination by act of the parties

(a)     Mutual consent

The agent and principal may mutually agree to terminate the agency agreement.

(b)     Revocation by principal

The principal can revoke the agency before performance is complete but may be sued for damages if the revocation is in breach of the agency contract.

(c)      Renunciation by agent

The agent can resign from the agreement before the agency has been completely performed and may be sued by the principal for damages if the renunciation is in breach of the contract.

(d)     Breach

If either principal or agent breaches the agency contract in a way that would amount to a breach of conditions the other party may treat the contract as discharged.

(e)     Commercial agents

If the contract for a commercial agent is terminated, the agent is entitled to commission for business he has introduced, repeat orders and renewal commission.

9.2 Termination by operation of the law

(a)     Personal incapacity

Death or insanity of either principal or agent will terminate the agency agreement.

Bankruptcy of the principal terminates the agency contract.

(b)     Destruction of subject matter

Destruction of the subject matter of the agency will terminate the agency contract e.g. if an agent is instructed to sell a ship but the ship is destroyed before the sale is effected.

(c)      Supervening illegality

The agency will be terminated where performance of the acts required to give effect to the agency becomes illegal e.g. a principal becoming an enemy alien on the outbreak of war.

(d)     End of  time

If agency is for a fixed period, the contract terminates at the end of that period.