“Mercantile Agent today plays a vital role in the transfer of goods from the producer to the ultimate consumer”.
A variety of people assist in the transfer of commodities from producers to consumers. A manufacturer may not be able to contact a consumer on his alone, thus he will require the assistance of other people. The items are transferred from the producer to the wholesaler, then to the retailer, and lastly to the ultimate consumers, in a highly organized and official procedure.
It’s vital to remember that this sequence of procedures must be meticulously followed in order to ensure that items are delivered quickly, safely, and on time to customers. As a result, in order to understand the organization of Home Trade, we must focus on the Middlemen, who play a crucial role in transporting goods from their point of manufacturing to their place of consumption.
Therefore, when a mercantile agent takes possession of goods with the owner’s approval and resells them, the legitimate ownership passes to the buyer provided the buyer bought in good faith and had no information that the seller lacked authority.
For example in the case of Folkes v King, for example, A delivered his car to B, his agent, with the specific direction not to sell it for less than a specified amount. B sold the car to C for a far cheaper price and kept the sale proceeds with him. C had purchased the car in good faith & also was unaware of A’s instructions to B. The court ruled that A cannot reclaim the car from C and that C retains possession of it.
Meaning & Characteristics
A mercantile agent is a person hired by businesses to act on their behalf or represent them in dealings with other businesses. The ‘Principal’ is the person on whose behalf he serves as an agent.
The following are the characteristics of a mercantile agent:
(a) He has the power to acquire and sell things on his principal’s behalf, or to consign them for sale;
(b) He does not conduct business for himself, but rather acts as an agent for his principal in all transactions;
c) In terms of business transactions, he serves as a connection between the principal & third parties.
(d) He acts as a business middleman between the maker as well as the end customer, assisting in the transfer of commodities without taking control of them;
(e) As a monetary consideration for his services, he is entitled to a commission from his principal.
Importance of appointing a Mercantile Agent
With the fast expansion of business activities, today’s business is no longer limited to a village, town, or state. It is rapidly spreading & reaching far & wide, even to the farthest regions of the planet. Today, a businessman from one nation may simply establish commercial relations with a businessman from another country.
International trade & commerce has been possible as transportation and communication infrastructure have improved and large-scale industry has increased. In this case, the businessman has several challenges, including delegating duty and authority to someone who can carry out the task on his behalf.
Furthermore, issues of time, distance, as well as efficiency have arisen. So, in order to overcome all of these challenges, it was considered that engaging someone to work on behalf of the business-man & assist him in running his company more efficiently and smoothly was as it was deemed required.
Today, such a person is known as a Mercantile or Commercial Agent, and they have become essential in modern business. As a result, we can observe that today’s Mercantile Agent plays an important part in the transmission of goods and commodities from the producer to the final customer.
Duties of an Agent:
- Performance of duties: By his agreement with his principal, an agent is obligated to execute all of the duties & obligations given to him by the latter to the best of his abilities.
- Maintenance of skill, care and diligence: While performing his responsibilities, the agent shall exercise reasonable skill, care, & diligence. He is expected to carry out his work on behalf of his principal with the same level of efficiency as he does his own work.
- Render proper accounts: The agent is responsible for providing his principal with a genuine, correct, and complete statement of accounts. He should not mix up the agency’s accounts with his personal accounts, and he should report the principal on the agency’s financial situation on a regular basis.
- Return money received: The agent is obligated to return any sums of money gained from the business to his principle since he is the trustee of the agency’s wealth.
- Delegation of Authority: Without the principal’s permission, the agent cannot delegate his power to others. If the principal agrees, an agent may designate a sub-agent to assist him, with the sub-agent being answerable & liable to the agent rather than the principal.
Rights of an Agent
- The right to be paid when the agency’s role is completed.
- The right to incur required expenses and have them repaid by the principle.
- Right of Possession on an agency or property.
- Lien on goods in the event of non-payment of his remuneration.
- The right to be reimbursed or indemnified for losses by the principal.
- Right to detain goods in transit.
Pledge by Mercantile Agent
According to Section 178 of Indian Contract Act, 1872- pledge by mercantile agent is defined as – “When a mercantile agent has possession of goods or the document of title to goods with the permission of the owner, any pledge made by him in the ordinary course of business of a mercantile agent is as valid as if he were expressly authorized by the owner of the goods to make the same; provided that the pawnee acts in good faith & has not notice that the pawnor does not have authority to pledge at the time of the pledge”.
There must be fiduciary relation & bond between principal and agent for running of successful business. Although there are many classes of Agents but Mercantile Agents plays an important role for principal in commercial purposes for example- A producer produces a product he is not in the position to sell his products everywhere for that he needs an agent, who works on his behalf. The agent acts as a business middleman between the maker as well as the end customer, assisting in the transfer of commodities without taking control of them. As we know that the business activities in India is expanding day by day, so businessman needs an agent to assist the principal .Today, businessman from one country may simply establish commercial relations with a businessman from another country. Furthermore, issues of time, distance, as well as efficiency have arisen. So, in order to overcome all of these challenges, it was considered that engaging someone to work on behalf of the business-man & assist him in running his company more efficiently and smoothly. The agent has the power & authority to purchase & sell goods on behalf of his principal and work as a link between principal & third party for the commercial purpose. As a monetary consideration for his services, he is entitled to a commission from his principal. There are various duties of agent which he owes towards his principle some of them are – a) the agent should act with reasonable skill, care & diligence while discharging his duties; b) The agent is expected to render true, correct & proper statement of accounts to his principal; c) The agent is obligated to return any sums of money gained from the business to his principle since he is the trustee of the agency’s wealth. The agent possess the right to remuneration on the completion of the agency function & has the right to get indemnified by the principal in cases of any kind of losses to the business.
- Dr. R.K. Bangia, Contract-II, 7th rev.ed. Sandeep Bangia, New –Delhi, Allahabad Law Agency, 2017.
 Folkes v. King.  1 KB 282.
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