Duties of an Agent- Indian Contract Act

1. Duty to execute mandate: This duty dictates that the agent is required to carry out the mandateof the principle, and any failure to do so would make the agent absolutely liable for the principal’s loss. Several cases such as Pannalal Jankidas v Mohanlal explain the same- where a commission agent was under instruction to insure the goods of the principle but failed to do so.

2. Duty to follow instructions or customs: Section 211 of the ICA explains that an agent is obligated to execute his principal’s business in accordance with the directives issued by the principal and to stay within the bounds of his position.[1] Following precedence of Bostock v Jardine and Lilley v Doubleday, “Any disobedience /departure from instructions makes the agent absolutely liable for the loss.”

An absence of instructions from the principal mandates that the agent must adhere to the customs in effect, where the agent conducts such business. In cases such as Ferrer v Robins, where the customs of a particular trade require that goods should not be sold on credit, or in return for a negotiable instrument. If these business practices are violated (as in this case), the agent is liable from any loss resulting in the transaction.[2]

Lastly, the agent has an obligation to maintain confidence, secrecy and non-disclosure of any sensitive information regarding the affairs of the principal.

3. Duty of reasonable care and skill: Section 212 of the ICA explains that every agent is bound to carry on the business of agency with reasonable skill and care. The standard of care and skill which an agent must bestow depends on the nature of his profession.[3] This is explained by Park v Hammond[4] where it was held that “An agent should command enough legal and professional knowledge to sufficiently and adequately safeguard the interests of the principal in due course of agency.”

 Furthermore, he is required to make compensation to the principal, with respect to direct factors of his own neglect, lack of skill and misconduct. It is interesting to note that Section 212 limits the agent’s liability to only direct consequences, and not damage done, which is indirectly or remotely caused by such neglect/ want of skill. A good example to explain this would be if, for example, an agent fails to send the principal’s money on time, he would be liable for the amount lost, and the interest payable on it, but not for if the principal becomes insolvent by that reason.

Additionally, it is the duty of an agent, to try his best to communicate with his principal and seek to obtain his instructions, before taking any steps in facing a difficulty or emergency.[5]

4. Duty to avoid conflict of interest: The agent’s personal interests, and duties to his principal most not conflict with each other as he has a fiduciary duty of care towards the principal. The agent specifically, is not allowed to have his personal interests vested in the principal’s transaction, which is elaborated on in section 216 of the ICA[6], and discussed in Armstrong v Jackson.[7]

Furthermore, the principal can seek recourse in this situation by proving that either a material fact has been dishonestly disclosed from him, or that the dealing of the agent has been disadvantageous to him.

5. Duty not to make secret profit

An agent should not make any profit or acquire any benefit in the course and in the matter of his agency without the knowledge and consent of his principal.[8] An agent who has made secret profit is liable to account to the principal for such profit in addition to any other remedies available to the principal for the agent’s breach of duty[9]. Secret profit is an advantage taken by the agent wherein he keeps a certain amount of remuneration to himself, which the principle is unaware off and would not be able to make otherwise. Such a profit should not be made by the agent through use of property, position, or knowledge.

6. Duty to remit sums

An agent is obligated to pay his principle all remunerations received on his account. However, the agent is allowed to deduct his lawful charges, but subject only to this right, the principal’s money must be remitted to him even if it has been received in pursuance to a void or illegal contract.[10] The agent has to perform his duty even if his earnings for the principal are arising out of void or illegal transactions and cannot use the defence of illegality of contract to withhold the consideration. However, the agent has a right to make a counter claim and cannot be compelled to deposit the amount in the court to protect the principle, particularly when there is a claim against the claim.[11]

7. Duty to maintain accounts

An agent is bound to render proper accounts to his principal on request. The agent must ensure that any property received on account of the principle must be maintained separately from his own and that he is only the trustee of such property[12]. The agent’s duty to maintain accounts may have to continue even if his agency with the principle has been terminated. The agent is under the duty to return all documents and property that had been prepared under the name of the principle. The agent is obliged to maintain accurate accounts of all the transactions and must fully disclose them to the principle. In the case of Ram Lai Kapur & Sons v Asian Commercial Assurance Co.[13] it was held that “the right to claim a statement of accounts is an unusual form of relief, only granted in certain specific cases where it would enable the claimant to assert his legal rights”

8. Duty not to delegate

An agent, unless so allowed by the principal, an estate agent has no right to appoint a sub-agent and delegate to him his powers which require special skill and care.[14] This is because the agent is chosen by the principle based on his confidence in his abilities. However, the agent may delegate to a sub-agent if the nature of work allows him to do so, if there are customs of trade, if the act is purely ministerial in nature and if he has the principal’s consent.

[1] The Indian Contract Act ,1872, Section 211.

[2] Ferrer v Robins, (1835) 2CM & r 152

[3] Pandurang v Jairamdas Pandurang AIR 1925 Nag 166

[4] Park v Hammond (1816) 6 Taunt 495: 128 ER 1127

[5] Buddulal Goerlal Mahajan v Shrikisan Chandmal AIR 1961 MP 57

[6] The Indian Contract Act ,1872, Section 216.

[7] Armstrong v. Jackson, Civil Action No. 05-0075 (JDB)

[8] Avtaar Singh, Contract and Specific Relief.

[9] Avtaar Singh, Contract and Specific Relief.

[10] The Indian Contract Act ,1872, Section 218.

[11] Avtaar Singh, Contract and Specific Relief.

[12] Avtaar Singh, Contract and Specific Relief.

[13] Ram Lai Kapur & Sons v Asian Commercial Assurance Co. AIR 1933 Lah 483.

[14] Avtaar Singh, Contract and Specific Relief.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

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The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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