Duties of agent (Agency Business Law)

Presentation on Duties of Agent.

1. Duties of Agent

2. 1. Duty to follow principal’s directions or customs (sec. 211) The first duty of every agent is to act within the scope of authority conferred upon him and perform the agency work according to the directions given by the principal. When the agent acts otherwise, if any loss be sustained, he must make in good to the principal, and if any profit accrues, he must account for it. Where the principal instructed the agent to warehouse the goods at a particular place and the agent warehoused them at a different warehouse which was equally safe, and the goods was destroyed by fire without negligence, it was held that the agent was liable for the loss because any departure from the instructions make the agent absolutely liable (Lilly vs. Doubleday)

3. If the principal has not given any express or implied directions, then it is the duty of the agent to follow the customs prevailing in the same kind of business at the place where the agent conducts business. If the agent make any departure, he does so at his own risk. He must make good any loss so sustained by the principal. Pawan , a broker, in whose business it is not the custom to sell on credit, sells goods of Madan on credit to Sagar , whose credit at the time was very high. Sagar , before payment, becomes insolvent. Pawan must make good the loss to Madan , irrespective of his good intentions.

4. 2. Duty to carry out the work with reasonable skills and diligence (Sec.212) The agent must 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 of his want of skill. Further, the agent must act with reasonable diligence and to the best of his skill. If the agent does not work with reasonable care, skill and diligence, he must make compensation to his principal in respect of ‘direct consequences’ of his own neglect, want of skill or misconduct. But he is not liable for indirect or remote losses. Hitesh, an agent for the sale of goods, having authority to sell goods on credit, sells to Gaurav on credit, without making the proper and usual enquiries as to the solvency of Gaurav. Gaurav, at the time of such sale, is insolvent. Hitesh must make compensation to his principal in respect of any loss thereby sustained.

5. 3. Duty to render account (Sec.213) It is the duty of an agent to keep proper accounts of his principal’s money or property and render them to him on demand, or periodically if so provided in the agreement. 4.Duty to communicate (Sec.214) It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions, before taking any steps in facing the difficulty or emergency.

6. 5. Duty not to deal on his own account (Sec215&216) An agent must not deal on his own account in the business of agency; i.e., he must not himself buy from or sell to his principal goods he is asked to sell or buy on behalf of his principal; without obtaining the consent of his principal after disclosing all material facts to him. If agent violates this rule, the principal may repudiate the transaction where it can be shown that any material fact has been knowingly concealed by the agent, or that the dealings of the agent have been disadvantageous to the principal. The principal is also entitled to claim from the benefit which may have resulted to him from the transaction.

7. A directs B to sell A’s estate. B, on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B informs A that he wishes to buy the estate for himself but conceals the discovery of the mine. A allows B to buy, in ignorance of the existence of the mine. A, on discovering that B knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option. Paras directs Madan to sell his estate. Madan buys the esatet for himself in the name of Pawan . Paras, on discovering that Madan has bought the estate for himself, may repudiate the sale, if he can show that Madan has dishonestly concealed any material fact or that the sale has been disadvantageous to him.

8. 6. Duty not to make any profit out of his agency except his remuneration (Sec217&218) An agent stands in a fiduciary relation to his principal and therefore he must not make nay profit (secret) out of his agency. He must pay to his principal all moneys received by him on principal’s account. He can, however, deduct all money due to himself in respect of his remuneration or/and expenses properly incurred. If his acts are not bona fide, he will lose his remuneration and will have to account for the secret profit to his principal.

9. 7. Duty on termination of agency by principal’s death or insanity (Sec.209) When an agency is terminated by the principal dying or becoming of unsound mind, the agent must take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him. 8. Duty not to delegate authority (Sec.190) An agent must not further delegate his authority to another person, but perform the work of agency himself.