agency contract

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Dear Sir,

The principal is liable for the misrepresentation or fraud committed by his agent while acting in the course of his business. It is immaterial whether the misrepresentation or fraud has been committed for the benefit of the principal or of the agent himself.

Example: A offered to buy a residential flats consisting of number of flats in it and enquired C, the property manager of B, whether all the tenants were paying their rents regularly. C informed A that the tenants were paying rents regularly with immaterial exceptions. This statement turned out to be false. B was held liable for fraud because his agent (property manager) who knew the real facts had made a false statement.

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Hi,

Agency in law connotes the relation which exists where one person has authority or capacity to create legal relations between a person occupying the position of principal, and third parties.

The essential feature of an agent is his power of making the principal answerable to a third person, viz. enabling the principal to sue third-parties directly or render him liable to be sued directly by the third party.

Liability of Agent is discussed in the Indian Contract Act under the following sections:

Section 185 - Lack of consideration will not void an agency. Once an agent accepts the employment of agency, he immediately becomes liable for the agent’s duties.

Section 195 In selecting such agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case; and, if he does this, he is not responsible to the principal for the acts or negligence of the agent so selected. n This section essentially sums up the liability of the agent for the acts of the substituted agent

If the agent had actual authority to perform the acts ratified then the agent gets relieved from personal liability to the principal for acting in excess of authority, and can recover his commission and expenses, and becomes entitled to the indemnity.

Section 212: An agent is always bound to act with as much reasonable diligence as a reasonable man with his qualification would act under similar circumstances. If the loss to the principal occurs in spite of the agent using such reasonable diligence, the agent is not liable.

Section 220: An agent cannot claim from the principal any remuneration if he’s acted totally contrary to the principal’s instructions or where the agent did not exercise proper skill and diligence

Section 235: A person untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with him as such agent, is liable if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.

Hope this helps you.

Regards,
Archit.