“The relationship between a Principal and an agent is entirely contractual one. But termination of such relationship without the knowledge of the agent may not render the act invalid which has been done after the recession of contact”-explain and evaluate
Introduction:
A company runs by its employees or agents. It is very essential for a company to hire potential agents. The way agents have responsibilities towards the company, similarly companies also have responsibility towards the Agents. Because When the companies are making any contract according to the contract Act 1872 to hire an agent that time they are ensuing their agent’s rights. The agent receives a commission or a fee paid by the principal. The customer’s legal relationship is with the principal, so if things go wrong it is the principal who is liable to the customer. Under the contract Act 1872 –any agreement is regarded as a contract when it is enforceable by law.
The key concept:
a) What is an agent?
An Agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the Principal. P appoints X to buy 50 bales of cotton on his behalf. P is the principal and X is his Agent. The relationship between P and X is called Agency.
b) Law of agency
The law of agency is an area of commercial law dealing with a contractual or non-contractual set of relationships .when a person called the agent is authorized to act on behalf of another which is called the principal to create a legal relationship with a third party
c) The function of agency
The function of an agent is to bring about contractual relations between the principal and third parties. Usually agents are appointed with specific instructions and authorized to act within the scope of their instructions. Acts of the agent within the scope of the instructions bind the principal as if he has done them himself. There is a legal maxim regarding agency viz. Quit facets per alum facets per se, which means He who does through another does by himself. The act of an agent is the act of the principal.
Contracts entered into through an agent, and obligations arising from acts done by an agent may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.
Agency deals with situations in which one person the principal uses another Person the agent to act on his behalf.
d) What is principal?
In commercial law a principal is a person legal or natural who authorizes an agent to act to create one or more legal relationships with a third party. This branch of law is called agency and relies on the common law
Several principals can jointly appoint one agent. The agent can act in respect of those affairs in which all the co-principals are jointly interested. The Power of Attorney, by virtue of which the agent was created, has to be strictly construed and what it authorized depend on the terms and the purposes for which it was executed
Relationship:
An arrangement in which one entity legally appoints another to act on its behalf is known as relation. In a principal-agent relationship the agent acts on behalf of the principal and should not have a conflict of interest in carrying out the act.
In the relationship between an agent and a principal, both parties consent to the agent having the ability to act on behalf of the principal. This is known as a form of principal-agent relationship called power of attorney. Such a relationship plays an important role in business whether it is in the workplace a partnership or a corporation.
There are three types of authority in a principal-agent relationship: express, implied, and apparent authority. Express authority is what the principal directly tells the agent his duties and responsibilities are. This cannot cover every detail though so the authority extends to what is necessary for the agent to carry out the principal’s instructions. Such authority is known as implied authority. There is also apparent authority in which the principal leads another to believe that a certain person is his agent. This is also known as agency by estoppels.
The relationship is said to be fiduciary meaning that there is a degree of trust and obedience on the agent’s part. The agent owes various duties to his principal. One of these is the duty of loyalty the agent must act for the principal’s benefit and not his own. He cannot be on both sides of a transaction unless both parties are aware of it and agree to it. The agent also cannot disclose trade secrets about the principal’s business after the term of employment is up. He must obey all of the principal’s orders provided they are reasonable. If any of the instructions go against the law, he will be held responsible for performing illegal actions. He is also required to carry out the actions of his principal as if he were doing it for himself.
Within the workplace this relationship plays a very important role. The association between employer and employee can be described as being principal-agent. This is also a master-servant relationship since the principal has a good amount of control over the agent. The employer controls the activities of the employee and is responsible for any injuries that might be caused by the employee’s activities provided the employee is acting within the scope of employment. The principal-agent relationship can also be seen with independent contractors. These people are hired to perform a certain task; however, the person who hires them is not the one who controls them. The principal does not have as much control over the independent contractor as he would in a master-servant relationship.
The relationship Agent & principal is contractual one:
Agency or Company is business or organization established to provide a particular service, typically one that involves organizing transactions between two. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be made to exist in law and then a company is itself considered a legal person. The name company arose because; at least originally it represented or was owned by more than one real or legal person.
Agent-principal relationship is very important in a business partnership as well. A partnership is created when two parties consent to be co-owners of a business for profit. The business becomes an extension of the partner’s personal liability and the profits or losses are passed through to the partner’s tax return. The partners are said to be agents of each other; therefore, they owe the duties mentioned above to each other. In addition to this, the partners must both work to manage the partnership. They can appoint these duties to specific partners, in accordance with the agency rules of express, implied, and apparent authority. Other times they may vote on certain matters and let the majority rule. Larger decisions in which no apparent authority can be claimed such as settling a lawsuit or selling the partnership’s assets or goodwill requires a unanimous vote.
The principal-agent relationship is also important in a corporation. Such a business is a legal entity in itself and is treated as a person under the law. It is run by a board of directors whom its shareholders elect. These directors make the policies of the corporation and look after it. They are agents of the corporation and owe a fiduciary duty to it; they must look out for the best interest of the corporation. They are held to the business judgment rule where they must show that their actions were made after carefully studying the situation. To benefit the corporation, they may choose to hire other agents, such as attorneys, accountants, or financial analysts. Directors also may not take for themselves an opportunity that their corporation may want.
The principal-agent relationship can end for several reasons; the contract might reach its end date, the purpose for the agency may be accomplished, or the principal may die or become incapacitated. Even if the agent is fired or if he quits, the agreement does not automatically end. The agent can still have lingering apparent authority since various third parties may remain unaware of the termination of the relationship. To ensure that the agent does not act beyond his authority at the end of the relationship, the principal must be sure to give notice that the person is no longer his agent. There are two kinds of notice. The first is actual notice in which the principal informs everyone with whom the agent is dealt. He must also give constructive notice to the general public to ensure that they are aware as well. He can do this through trade magazines or newspapers.
The relationship between a principal and his agent is one which is vital in the workplace and to many businesses, especially partnerships or corporations. Such a relationship ensures that the best interests of the business are looked out for and helps it to prosper in the long run.
AGENT’S DUTIES TO PRINCIPALS
l. Agent’s duty in conducting principal’s business: An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts- otherwise, if any loss be sustained he must make it goods to his principal, and, if any profit accrues, he must account for it.
(a) An agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investment. A must make good to B the interest usually obtained by such investments.
(b) A broker, in whose business it is not the custom to sell on credit, sells goods of an on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A.
2. Skill and diligence required from agent: An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business. Unless the principal has notice his want of skill.
PRINCIPAL’S DUTIES TO AGENT
Agent to be indemnified against consequences of lawful acts: The principal is bound to indemnify the agent against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.-Sec. 222.
AGENT’S RIGHTS
1. Enforcement of rights: The agent can enforce all the duties of the principal. The principal’s duties are the agent’s rights.
2.Agent ‘s Right of Retainer : An agent may retain, out any sums received on account of the principal in the business of the agency, a11 moneys due to himself in respect of advance made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to hi for acting as agent<href=”#_ftn3″ name=”_ftnref3″ title=””>[3]
3. When agent‘s remuneration becomes due: In the absence of any special contract, the agent’s remuneration does not become due until he has completed the act for which he was appoint agent. -But an agent may detain moneys received by him o account of goods sold, although the whole of the goods consigned to him for sale may have been sold, or although the sale may be actually complete.
4. Agent not entitled to remuneration for business misconduct: An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect
PRINCIPAL’S RIGHTS
l. Compensation: The principal is entitled to compensation for any breach of duty by the agent.
2. Agent‘s duties: The agent’s duties are the principal’s right 3. Revocation: The principal can revoke the agent’s authority subject to certain conditions
Contract Act, 1872
A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. The person who gives the guarantee is called the surety the person in respect of whose default the guarantee is given is called the principal debtor and the person to whom the guarantee is given is called the creditor. A guarantee may be either oral or written.
The Law of Contract deals with the law relating to the general principles of contract. It is the most important part of Mercantile Law. It affects every person in one way or the other, as all of us enter into some kind of contract every day.
• Since this law was not happily worded, two subsequent legislations namely Sale of Goods Act – Sections 76 to 123 of the Contract Act 1872 were repealed
• The term Contract is defined in Section 2(h) of the Contract Act, which reads as under an agreement enforceable by law is a contract.
• The analysis of this definition shows that a contract must have the following two elements: 1. an agreement and 2. The agreement must be enforceable by law.
• Every agreement is not a contract. When an agreement creates some legal obligations and is enforceable by law, it is regarded as a contract.
ESSENTIAL ELEMENTS OF CONTRACT
1. Agreement
2. Intention to create legal relationship
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Must be in writing. (Generally, oral contract is not enforceable)
8. Agreement not declared void or illegal.
9. Certainty of meaning.
10. Possibility of performance.
11. Necessary legal formalities.
Misrepresentation in English law is an area of English contract law, which allows a person to escape a contractual obligation or claim compensation for losses. If one person can show that she entered an agreement because of another person’s false assurances, then the other person will be unable to enforce the agreement against her, and may have to pay her damages. A misrepresentation can be an outright lie, an unintentional but careless falsehood, or an innocent slip of the tongue. In most cases English law allows escape from the bargain when a misrepresentation was made, because it holds that people should only assume contractual obligations when they have given their true consent.
When a misrepresentation has been made and an agreement does not have to bring a halt to the deal. Misrepresentations generally do not render a contract void, as does the contractual doctrine of common mistake or frustration. It merely means that a contract will be voidable at the option of the misrepresented. This is because not all contracts entered into on the strength of misrepresentations will always be bad, and it is thought more just to give the wronged party the choice about how to proceed.
Conclusion
In conclusion, law is one of the most basic social institutions and one of the most necessary. A contract to be made by an agent on behalf of a principal is considered to be the contract of the principal and not that of the agent. It allows the principal to authorize somebody to carry out her duties, either for a specific purpose or generally The agency relationship is usually entered into by informal agreement, but also can occur by formal agreement the acts must be legal
In the end of this paper we can say that under the law of 1872 principal should have informed before the termination. And if agent obeys he’s reasonable instructions given by the Principal. Principal must inform what the reason of termination is. Because it’s all about a legal agreement and if principal didn’t inform the agent could take the legal action under the circumstance
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The agent is always bound to act with reasonable diligence, and to use such skill as he possesses.; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damages which are indirectly or remotely caused by such neglect, want of skill, or misconduct.-Sec.212.
Sec 217.