Agent and Principal

An “agent” is a person employed to do any act for another, or to represent another in dealing with third person. The person for whom such an act is done, or who is so represented, is called the “principal”. The contract between Principal and Agent is called ‘Contract of Agency’. Section 182 of the act defines the terms “Agent” and “Principal”.

Types of an Agent

1. Brokers
2. Factors
3. Del Ceredere Agents
4. Auctioneers

Duties Of An Agent

1. Agent’s duty in conducting principal’s business (Section 211): An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it. Illustration: B, a broker in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make goods the loss to A.
2. Skill and diligence required from an agent (Section 212): An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. 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 in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct.
3. Duty to render proper accounts (Section 213): According to Section 213 of the Indian Contract Act 1872, an agent is bound to render proper accounts to his principal on demand.
4. Duty to communicate with principal (Section 214): It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.
5. Not to deal on his own account: Section 215 of the Indian Contract Act 1872 deals with rights of principal when the agent deals, on his own account, in the business of agency without principal’s consent. Section 215 runs as follows- If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.
6. Not to make Secret Profits: Section 216 of the Indian Contract Act, deals with Principal’s right to benefit gained by the agent dealing on his own account in the business of agency. An agent, without the knowledge of his principal, should not deal in the business of agency on his own to make secret profit. Illustrations: A directs B, his agent, to buy a certain house for him. B tells A it cannot be bought, and buys the house for himself. A may, on discovering that B has bought the house, compel him to sell it to A at the price he gave for it.
7. Duty to pay sums received for principal: According to Section 218 of the said act, an agent is bound to pay to his principal all sums received on his account. It is the duty of an agent to maintain secrecy of the business of agency and should not reveal the confidential matters.
8. Duty not to delegate his duties (Section 190): When an agent has undertaken to perform certain duties personally, he is not allowed to delegate his duties to another person.