⭐ QUESTION 6: RIGHTS AND DUTIES OF AN AGENT – SUPER DETAILED ANALYSIS WITH CASE LAWS
Relevant Sections: 182–238, Indian Contract Act, 1872
I. WHO IS AN AGENT? (Section 182)
A person employed to do any act for another or to represent another in dealing with third persons.
Essence:
- Based on trust, confidence, fiduciary relationship.
- Principal–agent relationship is created by express or implied authority.
🟦 II. DUTIES OF AN AGENT (FULL DETAILED WITH CASE LAWS)
1. Duty to obey instructions (Sec. 211)
Agent must strictly follow the instructions of the principal.
Case Law 1 – Lilley v. Doubleday (1881)
Agent stored furniture in a warehouse other than what principal ordered. Warehouse caught fire.
Held: Agent liable because he disobeyed instructions.
Case Law 2 – Turberville v. Stampe (1697)
Servant’s negligence caused fire to spread.
Principle: Agent must follow instructions and must act with reasonable care.
2. Duty to exercise reasonable care, skill & diligence (Sec. 212)
- Agent must act as a prudent person.
- If he claims professional knowledge (broker, lawyer), he must show higher skill.
Case Law – Pannalal Jankidas v. Mohanlal (1951, SC)
A commission agent failed to insure goods carefully.
Held: Agent liable—did not show reasonable skill.
3. Duty to render proper accounts (Sec. 213)
- Agent must maintain accurate books.
- Must submit accounts on demand.
Case Law – Morison v. Thompson (1874)
Agent failed to produce proper accounts → held liable.
4. Duty to communicate in case of difficulty (Sec. 214)
Agent must immediately contact principal if any confusion arises.
Case Law – Pannalal Jankidas case also relevant
Agent must communicate difficulties and take proper steps.
5. Duty not to deal on his own account (Sec. 215–216)
Agent cannot purchase or sell principal’s property for himself without consent.
Case Law 1 – Armstrong v. Jackson (1917)
Agent sold his own shares to the principal pretending they were market shares.
Held: Principal can repudiate the contract.
Case Law 2 – Keppel v. Wheeler (1927)
Agent ignored a higher offer for property and sold to a lower buyer.
Held: Breach of loyalty → agent liable.
Case Law 3 – De Bussche v. Alt (1878)
Agent secretly bought goods through a third party.
Held: Principal can set aside the transaction.
6. Duty to pay sums received for principal (Sec. 218)
Agent must return all money received on principal’s behalf.
Case Law – Lallan Prasad v. Rahmat Ali (1967, SC)
Agent who holds goods/money must return them before claiming remuneration.
7. Duty to protect and promote principal’s interest (Fiduciary Duty)
Not expressly in sections but legally imposed by courts.
Case Law – Regal (Hastings) Ltd v. Gulliver (1942)
Agents cannot make secret profits from their position.
8. Duty not to delegate (Sec. 190–193)
Agent must act personally unless:
- principal permits,
- custom of trade,
- necessity exists.
Case Law – De Bussche v. Alt
Delegation allowed only if necessary.
9. Duty after termination of agency (Sec. 209)
Agent must take reasonable steps to protect principal’s interests until principal knows of termination.
Case Law – Rhodes v. Forwood (1876)
Agent responsible for goods until principal informed.
🟩 III. RIGHTS OF AN AGENT (FULL DETAILED WITH CASE LAWS)
1. Right to Remuneration (Sec. 219–220)
- Earned after completion unless agreed otherwise.
- If misconduct → no remuneration.
Case Law – Lallan Prasad v. Rahmat Ali (1967, SC)
Agent cannot claim remuneration unless he performs his obligations.
2. Right of Retainer (Sec. 217)
Agent may deduct:
- remuneration,
- expenses,
- advances
from money received on principal’s behalf.
3. Right of Lien (Sec. 221)
Agent can retain goods, papers, property until he is paid.
Case Law – Jupudi Kesava Rao v. Pulavarthi Lakshminarayana (1971, SC)
Lien is available only for lawful charges.
4. Right to Indemnity (Sec. 222–223)
Principal must indemnify agent for:
- lawful acts,
- acts done in good faith.
Case Law – Adamson v. Jarvis (1827)
Agent sold cattle assuming principal owned them. Agent was sued.
Held: Principal must indemnify agent.
Case Law – National Bank of Lahore v. Sohan Lal (1962)
Bank acted as agent for customer; was indemnified for good-faith acts.
5. Right to Compensation (Sec. 225)
If the principal’s negligence injures the agent, he can claim compensation.
6. Right of Stoppage in Transit (Commercial Agents)
If the principal is insolvent → agent financing goods can stop goods in transit.
Case Law – Ex parte Scarth (1803)
Agent with special property rights may stop goods in transit.
7. Right to Sue the Principal
If principal refuses to pay remuneration or expenses, agent can sue.
Case Law – Gorden Woodroffe v. Sheikh M. A. M. (1967, Madras HC)
Agent can maintain suit for commission.
🟦 IV. OTHER IMPORTANT CASE LAWS FOR AGENCY (EXAM ADD-ON)
1. Syed Abdul Khader v. Rami Reddy (1979, SC)
Principal bound by agent’s acts done within apparent authority.
2. Union of India v. J. L. Morrison (1960, SC)
Principal liable for agent’s acts within course of employment.
3. Bolton Partners v. Lambert (1889)
Principal can ratify an unauthorized act of agent → binding retrospectively.
4. Sita Ram v. Radhabai (1968, SC)
Agent–principal relationship must be based on good faith and trust.
🟥 V. DIFFERENCE BETWEEN RIGHTS AND DUTIES (Exam Summary)
| Rights of Agent | Duties of Agent |
|---|---|
| Benefits enjoyed by agent | Obligations agent owes to principal |
| Remuneration, lien, indemnity | Obey instructions, care, loyalty |
| Protect agent interest | Protect principal interest |
| Enforceable in court | Violation causes liability |
VI. CONCLUSION (Perfect for 12–15 Marks)
Agent occupies a fiduciary position requiring utmost good faith.
Indian Contract Act ensures a balance:
- Protects principal through strict duties, and
- Protects agent through rights like remuneration, lien, and indemnity.
Agency law ensures smooth functioning of business, commercial transactions, and representation, making it an essential part of contract law.
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