Classes of Agents

Introduction

An agent, according to section 182 of Indian Contract Act,1872 is a person who represents his principle in contractual relationships with third parties. Under an agency contract, the principal appoints or engages an agent. As a result, an agent serves as a conduit between the principal and third parties. By his actions, an agent ties the principal. In other terms, a principal is liable to third parties for the actions of an agent. When an agent acts on behalf of his principal, he possesses his principal’s authority. Agents are categorised in a variety of ways. There may be (a) a general classification, such as mercantile or non-mercantile agent, (b) a classification based on the scope of authority, such as special or general agent, (c) a classification based on liability, such as del-credere agent, and (d) a classification based on control, such as sub-agent. We are, however, categorizing them on a broad scale.. Let’s take a closer look at how agents are classified.

General Agent

In all transactions or in all transactions connected to a given trade, business, or issue, the principal appoints a general agent to perform anything within his authority. The principle gives the agent power to act on his behalf.

The 3rd party may assume that such an agent has the power to perform all of the functions of a general agent. The third party is unaffected by any private constraints on the agent’s authority.

Special Agent

He is the person who has been assigned or hired to accomplish or perform only one act, duty, or function. He has no authority or power outside of this one-of-a-kind deed, duty, or function. The 3rd party cannot presume that the agent has unrestricted authority in this circumstance. As a result, any action taken by the agent outside of his authority will not bind the principal.

Mercantile Agent

A mercantile agent is defined as a person who, in the ordinary course of business, has the power to sell or consign commodities for the purpose of sale, to acquire goods, or to raise money on the security of goods, according to section 2(9) of the Sale of Goods Act, 1930. As a result, this definition encompasses the following:

  1. Factors :

A factor is one who has possession of goods & commodities or documents of ownership in their possession. He has the authority to conduct business in his own name. He has a general lien on the commodities belonging to his principle for a general balance of account since he has title of the goods.

His authority has a wide range of character. He has the ability to sell goods on credit. He has the ability to accept payment & issue a legitimate receipt for the money he has received. If he is in possession of commodities or documents of title with his principal’s approval, he may sell, pledge, or otherwise dispose of the goods or items in the regular course of business.  The principal is responsible for the agent’s actions, provided that the third party acted in good faith & also in bona fide and had no knowledge of the flaw agent’s authority.

  • Brokers :

A broker is defined as a person who makes contracts with other parties for the selling & purchasing of products or securities for brokerage purposes.

He acts as both a seller’s and a buyer’s agent. He is not granted ownership of the goods or documents of ownership. On behalf of his principal, he sells & purchases things. He acts in his principal’s name and lacks the authority to act in his own name or transfer his authority. He doesn’t have a lien because the property was not in his ownership.

Del credere Agent

A del credere agent defined as a person who assures or guarantees his principal that the creditors of goods and commodities will pay for the things they purchase in exchange for further remuneration. In this situation that the third party fails to pay, he must pay the due amount to his principal.

Bankers

A banker’s relationship with a customer is similar to that of a debtor & creditor. When a banker purchases or sells securities on behalf of a customer, or collects cheques, dividends, interest, bills of exchange, or promissory notes, he becomes the customer’s agent. As a result, he has a general lien on all of the securities he owns in relation to the general debt owed to him by the client.

Partners

Every partner in a Partnership firm is both an agent and the principal of every other partner, according to the Partnership Act. In addition, each partner acts as the firm’s agent for the firm’s business.

Auctioneers 

An auctioneer is a person who is hired to sell things to the highest bidder at a public auction. Otherwise, he will be held accountable for negligence if he does not take reasonable precautions to limit the loss of his principal. As a result, he is unable to sell the products & goods on credit. He is only allowed to sell goods on cash. He may take payment in the form of a cheque, but not a bill of exchange or a promissory note.

In the absence of a reserve price, an auctioneer must sell to the highest bidder. However, if a reserve price has been established, a buyer is obligated by it, even if the reserve price’s exact amount was unknown to the buyer at the time of sale. However, even if the auctioneer acts contrary to the principal’s secret instructions, the principal will be liable to the 3rd party by the auctioneer’s acts performed within the limits of his apparent authority.

Example:

An auctioneer was given the task of selling a pony at an auction with a reserve price of Rs. 25. The agent mistakenly sold the pony for Rs. 16 only, much below the reserve amount. The principal was bound by the transaction of sale, it was held in Hawkins v. Rainbow[1].

In the given scenario, the principal can recoup his loss from the auctioneer. Furthermore, if the auction sale does not materialize or proves abortive, i.e. fails, an auctioneer has no implied authority to make a private or secret sale, even at a greater price than the reserve price.

Main classes

Sub-Agent

A sub-agent is a person engaged by and acting under the direction of the original agent, according to section 191. As a result, a sub-agent is the agent of the principal or original agent. The original agent selects a sub-agent to whom the principal’s task is delegated. A sub-relationship agent’s with the original agent is similar to that of an agent and principal.

A sub-agent is bound by all of the original agent’s responsibilities. He is not directly answerable to the principal, however, unless he commits fraud or willfully wrongs. He is, nevertheless, completely responsible to the original agent who appointed him. In addition, the original agent is liable to the principal for the actions of the sub-agent. A sub-agent represents the principle & also binds the principal for all of his activities as if he were an original agent in the situation of 3rd parties.

Substitute Agents:

According to Sections 194 and 195 – When an agent with express or implied authorization to name another person to act for the principal in the agency’s business has done so, that person is not a sub-agent, but an agent of the principal for the part of the agency’s business that is entrusted to him. Substitute agent is a term used to describe this type of agent. A substitute agent is the principal’s agent, & he is answerable to the principal in the same way.

Co-agent:

Co-Agents are two or more individuals who have been designated as agents by the principal to operate as such jointly or severally. Except for their authority to bind the principal, co-agents should agree jointly. Unless there is proof to the contrary, they are jointly liable. When an agent is designated as a co-agent, he or she must exercise some amount of discretion as a prudent individual would in his own instance. If he does this, he is not liable to the principal for acts of negligence of the co-agent.

References

  • Dr. R.K. Bangia, Contract-II, 7th rev.ed. Sandeep Bangia, New –Delhi, Allahabad Law Agency, 2017
  • toppr.com/guides/business-laws-cs/indian-contract-act-1872/classes-of-agents/
  • preservearticles.com/notes/short-notes-on-the-classes-of-agents/19266
  • citeman.com/6566-classification-of-agents.html

[1] Hawkins v. Rainbow 1904, 2 K. B. 322, 324.

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