Table of Content

Home
BBS 3rd year
Business Law

BBS 3rd year business law important Question | Unit 5 (Contract of Agency)



👉🏻MEANING OF AGENCY

The term agency is used to refer to the relationship between two persons where a person is appointed to act as a representative of another. 'Agency' is a contract between agent and principal where the agent is appointed by the principal to act on behalf of him while dealing with a third party.

👉🏻ESSENTIALS OF AGENCY

A contract between two parties amounts to a contract of the agency if it fulfills the following essentials:

  1. Agreement between the agent and principal
  2. Universal declaration of the principal to be bound by the act of his agent
  3. Intention of the agent to act on behalf of the principal

👉🏻BASIS OF AGENCY

There are two important rules on which the whole law of agency depends. They are:

  1. Whatever a person can do personality, he can do through an agent
  2. He who acts through another, acts by himself.

👉🏻POSITION OF AN AGENT

A question may arise regarding the position of an agent in an agency with three possible propositions:

  1. He is not an independent or sovereign character
  2. He is not a Servant.
  3. He is above than servant and below than independent character

👉🏻WHO MAY EMPLOY AN AGENT?

Any person who has not suffered from the incapacity to contract as described under section 3(1) of the Contract Act, 2056 may employ an agent to perform those acts which he can do personally or has the authority to do so.

👉🏻CONTRACTUAL CAPACITY OF AN AGENT

An agent who brings the principal into a contractual relationship with a third person and does not incur liability does not necessarily that he should have contractual capacity.

👉🏻TYPES OF AGENT

  1. On the basis of the extent of authority a. Special agent b. General agent c. Universal agent

  2. On the basis of the nature of work to be performed by agent a. Mercantile agents: It includes:

     i. Factor

 ii. Auctioneer

 iii. Commission agent

 iv. Broker

  v. Del-credere agent

 vi. Banker

    b. Non-mercantile agent: It includes an attorney, solicitor, wife, and customs clearance agent.

👉🏻CREATION OF AGENCY

The relationship between agent and principal may arise in any one of the following ways:

  1. By express authority/ Contract: Where a contract is made or authority is given by express words written or spoken.
  2. By implied authority/ Contract It may take place in either one of the following forms: a. Agency by estoppel b. Agency by holding out c. Agency by necessity
  3. By ratification: It is the subsequent acceptance of the previous acts done by the principal without his authority. Essentials of a valid ratification:
  4. Principal must be named or identifiable i. The principal must be in existence at the time of contract ii. The principal must have contractual capacity iv. The principal must have full knowledge of the true facts v. Ratification must be done within a reasonable v time vi. The whole transaction must be ratified vii. The act to be ratified must not be unlawful or ultra-vires in the case of a company viii. Ratification must be communicated ix. Ratification may be expressed or implied x. Ratification should not put a third party to damages

👉🏻LIMITATION TO THE RATIFICATION:

   i. Where the agent did not disclose the principal.
   ii. Where the principal is incapable of contract.
   iii. Where the principal, at the time of contact, was incapable of contract.
   iv. Where the principal, does not have full knowledge of facts.
   v. Where the ratification is not communicated to the concern parties.
   vi. Where the principal has no power to ratify the acts done.
   vi. Where the ratification causes harm or injury and third person.
  1. Agency by operation of law: The law places a person as an agent of another.

👉🏻RIGHTS AND DUTIES OF AGENT AND PRINCIPAL

a. Duties of the Agent

  1. Duty to follow the instructions given by the principal
  2. Duty to exercise care skills and diligence
  3. Duty to keep and render proper accounts to his principal
  4. Duty to follow custom
  5. Duty to communicate with the principal in case of difficulty
  6. Duty to pay sums received to the principal
  7. Duty not to deal on his own account
  8. Duty not to make secret profit from the business of agency
  9. Duty not to use information obtained in the course of agency against the principal
  10. Duty to protect and preserve the interest of the principal in case of his death or insolvency
  11. Duty not to delegate authority

Rights of Agent

  1. Right to receive remuneration
  2. Right to be indemnified
  3. Right to receive compensation
  4. Right of lien
  5. Right of retainer

Duties of principal

  1. Duty to indemnity • Duty to indemnify the agent against the consequences of all lawful acts Duty to indemnify the agent against the consequences of acts done in good faith
  2. Duty to pay compensation
  3. Duty to pay remuneration or commission
  4. Duty to respect the agent's right of lien

Rights of Principal

  1. Right to recover damages
  2. Right to be indemnified
  3. Right to demand accounts of business
  4. Right to recover secret profit earned by agent
  5. Right to terminate the agency

👉🏻DELEGATION OF AUTHORITY

The general rule of agency is 'Delegates non-potest delegate', which means a person having delegated authority cannot delegate that authority to another. Where the original agent delegates his authority, the person so appointed may be either a sub-agent or a substituted agent.

👉🏻Sub-agent:

A sub-agent is a person employed by and acting under the control of the original agent in the business of the agency. An agent may delegate his authority in the given conditions:

  • Where the business of an agency is such that its performance requires no personal skill or confidence.
  • Where the nature of work necessitates execution by a deputy.
  • Where customs or usage of trade permits the appointment of a sub-agent.
  • Where the principal is aware of the agent's intention to appoint a sub-agent but does not object to it.
  • Where the contract expressly authorizes the agent to appoint a sub-agent.
  • Where there is an unforeseen emergency.
  • Where the principal permits the appointment of a sub-agent.

👉🏻Co-agent and Substituted Agent:

Where an original agent, with the express or implied authority or consent of the principal, appoints or employs another to act on behalf of the principal in the business of the agency for which the original agent was appointed, he is known as a substituted agent.

👉🏻PERSONAL LIABILITY OF AGENT

The general rule is that only the principal can enforce and be held liable for a contract entered into by the agent. An agent will be personally liable in the following cases:

  1. When the contract expressly provides
  2. When the agent acts for an undisclosed principal
  3. When the agent acts for a principal who cannot be sued
  4. When the agent signs a contract in his own name
  5. When the agent acts in contravention of or beyond the authority given to him
  6. When the agent acts for a foreign principal
  7. Where the agent acts for a principal, not in existence
  8. When custom or usage of trade makes him personally liable
  9. When money is paid by mistake or fraud
  10. When the authority is one coupled with interest

👉🏻TERMINATION OF AGENCY

When the agency relationship comes to an end or the agent becomes free from the contract of the agency, it is known as the termination of the agency.

A. Termination of Agency by Acts of the Parties:

  1. By agreement
  2. By revocation by the principal

An agency becomes irrevocable in the following cases:

  • Where the agency is coupled with interest
  • Where the agent has incurred personal liability
  • Where the agent has partly exercised the authority

B. Termination of Agency by Operation of Law:

  1. By performance of contract
  2. By expiry of time
  3. By destruction of the subject matter of the agency
  4. By happening of any event rendering the agency impossible or unlawful
  5. By the death of either party
  6. By insanity of either party
  7. By insolvency of either party
  8. By dissolution of a company

👉🏻AGENCY LAW IN NEPAL

In Nepal, the law relating to agency is regulated by the Agency Act 2014 Agency regulations 2019, and the Civil Code, 2074.

👉🏻REGISTRATION OF AGENCY BUSINESS

A person who wants to act as an agent has to apply to the Commerce Department of the Nepal Government to register his name stating particulars in the form of

schedule 1 of Nepal agency rules, 2019 along with Rs. 1,000 as the registration fee. When an application is submitted then the concerned officer shall examine the application and his name is registered as an agent. If his name is not to be registered such notice should be given to him. The agency shall be valid for one year only and is to be renewed within the month of Baisakh of each fiscal year with a prescribed amount.

👉🏻EFFECT OF NON-REGISTRATION

A person intending to act as an agent necessarily registered his name and no one can be an agent without being registered. Under section 8 of the Agency Act 2014 if a person is found doing agency business without registering his name he should be fined up to Rs. 1,000.

Sure! Here’s the formatted version for Notion:

Post a Comment