CREATION OF AGENCY
The relation of agency arises whenever one person known as the agent has got authority to act on behalf of another person known as the principal. There is a consent given from one person to another. The relationship has its own benefit in a contract and this relationship is needed in any of the following ways-
1) By express of appointment (Express- coming into knowledge of everyone)
2) By the conduct of a party
3) By necessity of the case
4) By subsequent ratification
Any person who is competent to contract and who is of sound mind may appoint an agent. The relationship between the principal and agent can only be established by the concern of the principal and agent. They will be held to have the consented if they have agreed to what amount to such a relationship of agency, but it is important that consent is given either expressly or by implication by their words or conduct.
In Indian Law, if written under section 182 is much wider because it does not limit the employment to one by the principal only, it will include an employment by any authority authorized by law to make such employment.
Where the appointment is made by the deed (document) it is called power of attorney. The Supreme Court has stated the relationship has its own genesis in a contract. If agency is the outcome of a contract between the principal and agent then deed is known as power of attorney and oral appointment is also valid even though the contract which the agent is authorized to make has to be in writing.
2) Implied Agency (By the Conduct of the Party)
Implied Agency arises from the conduct/situation or relationship of the party. Whenever a person places another person in a situation in which that other person is understood to represent or act for him, he become an implied agent. Hence woman allowed her son to drive a car for her, she paying all the expenses of maintenance and operation, it was held that the son was an implied agent of her mother and when he made a collusion injuring his wife, the wife could sue the mother for the fault of the agent.
Permission granted to a person to ferry a car from one place to another makes an agent for that limited purpose so as to create liability for consequence of negligent driving. The borrower of the car would not occupy that possession, hence an employer who is allowed to collect premium from his employer and forward the collection to organize agent, became an implied agent of the organization though described explicit plea described precisely in the scheme as the agent of the employee.
3) Agencies of Necessities- The reason for Agency of Necessity has been explained as under ‘’Although the powers of the agent are ordinarily limited to particular act yet concise extraordinary emergency may arise in which a person who is an agent may be justified in assuming extraordinary power and all his act fairly done such circumstances will be binding upon his principal because of the necessity of case.
ORIGIN- The principal of agency of necessity was applied to the cases of Marine Adventures. Unforeseen, emergency may arise in the course of the marine adventure which may threaten the goods and the master to ship is not able to communicate with the principal. In such circumstances, the master gets the power and it is also his duty to sell the goods in order to save their value. Such a sale will bind cargo owner. Initially, it was supposed that this type of necessity is associated to exceptional cases but it has been applied in another cases.
SIMS AND COMPANY VS MIDLAND RAILWAY COMPANY
The facts of the case are such that a quality of butter was conscience with the attended railway company. It was delayed in transit because of a strike. The Company sold the goods because of its perishable nature. The Court held that this sell is binding upon the Railway Company. And the defendant company action of sale was justified by the necessities of the case.
PRE-EXISTING AGENCY NOT NECESSARY
It was also supposed at one time that agency of necessity is confined to cases in which there is subsisting relationship of principal and agent and the agent in some emergency exercises an authority which is not provided in the contract. This is explained in an example that’’ The Agency of Necessity’’ develop from an original and subsisting agency and only applies itself to unforeseen events not provided for in the original contract.
Basically two cases have been usually cited in support of this proposition namely-
a) Where the finder of a dog spends money on feeding it.
b) A person sent money on rescuing logs of a river. And neither of them could claim a lien on the goods for his troubled expense.
CONDITIONS FOR APPLICATION OF NECESSITY
The conditions which enable a person to act as an agent of necessity of another have been stated by justice Mccardy as follows ‘’In the first place, it is of course clear that agency of necessity does not arise if the agent can communicate with his principal.
The bases of this requirement are that if the principal’s direction can be obtained, the agent should ask before acting. It is essential for the agent to prove that the sale was necessary which means why necessary is meant reasonably necessary every material circumstance must be taken into account that is danger, distance, accommodation, expense, time and so for.
4) By subsequent ratification of an unauthorized act
When an act of a person who acted as another person’s agent (on his behalf) without his knowledge is later ratified by that person, this creates an agency by ratification between the two.
A principal may subsequently ratify an act done by a person who acted upon his behalf without his knowledge. If the act is ratified a relationship of agency will come into existence and it will be as if he had previously authorized the person to act as his agent. Ratification may be expressed or implied.
CASE- PANNALAL JANKIDAS VS MOHANLAL
A commission agent purchased goods for his principal and stored them in a go down sending for dispatch. The agent was under instruction to ensure them. He actually charged the premium for insurance but failed to ensure them. The goods were lost in an explosion at the Bombay Harbor. The Agent was held liable to compensate the principal for his loss.
Section 214 talks about the duty of the Agent to communicate with the principal in all circumstances. The agent must use all reasonable diligence for communicating with principal and in order to keep the instructions.
Where the agent informed his principal that purchases have been affected on his behalf and subsequently confirmed it by reporting that the goods would be dispatched as soon as the transport strike is over. But he had done nothing in the matter. The Supreme Court held that such a neglect or misconduct of the agent misinforming the principal will fall under Section 214 and agent will be held liable to compensate the principal.
Section 216 states that if an agent deals in the business of the agency in his own capacity instead of principal’s capacity. Without the knowledge of the principal, the principal gets entitled to claim any benefit resulting from such transaction from the agent.
Duty to Remit (Return) Terms (Section 218)
Section 218 states agent’s duty to pay sums received for principal’s work wherein the agent is bound to pay all the sums to the principal that are received on his account to all deductions.
The agent is bound to pay those to the principal all sums received. However, he is entitled to deduct his lawful charges.
Duty to Maintain Account (Section 213)
Section 213 states that an agent is bound of performance to render proper account to his principal whenever the Principal demands. Accounts are necessary for the purpose of performance upon the agent duties such as duty to remit sums to the principal.
Duty not to Delegate (Section 190)
Delegatus Non Potest Delegate is a well established magazine of the law of agency. The principal uses a particular agent because the principal has immense trust and confidence in the integrity and the competence of the agent. Hence ordinarily an agent cannot further delegate the work which has been delegated to him by the principal.
Section 190 of the Indian Contract Act states that an agent cannot employ another person to perform act which he has expressly or impliedly undertaken to perform personally until and unless a sub agent may by the ordinary custom of trade from the nature of the agency being employed .
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