Who are Agents and Rights and Duties of Agents

Agency is an important concept under the Indian Contract Act, 1872. In commercial and legal transactions, it is often necessary for one person to act through another person. Business activities such as selling goods, purchasing property, negotiating contracts, and managing financial transactions frequently require representation. The law recognises such representation through the concept of agency.

An agent performs acts on behalf of another person known as the principal. The acts done by the agent within the scope of authority create legal relations between the principal and third parties. Therefore, the actions of the agent may bind the principal in the same way as if the principal had personally performed those acts.

Because an agent represents the principal in dealings with third parties, the law imposes certain rights and duties on the agent. These provisions ensure that the agent is protected while performing authorised acts and at the same time required to act honestly, carefully, and in the interest of the principal.

Meaning of Agent and Principal

The meaning of an agent is provided under Section 182 of the Indian Contract Act, 1872.

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 acts are performed is called the principal.

The relationship of agency therefore involves three essential elements:

• the principal, who appoints the agent
• the agent, who performs the act
• the third party, with whom the agent deals

The main feature of agency is representation. The agent does not merely act independently; instead, the agent represents the principal and creates legal obligations between the principal and third parties.

The courts have also recognised the broad scope of agency. In Kalyanji Kuwarji v. Tirkaram Sheolal, the court emphasised that the Indian Contract Act does not rigidly classify agents into specific categories but recognises agency relationships based on authority and representation.

Similarly, Sukumari Gupta v. Dhirendra Nath Roy Chowdhury recognised that an agent may be appointed either directly by the principal or through authority given by law.

Types of Agents

Agents may be classified according to the nature and extent of authority granted to them.

General Agent

A general agent is authorised to perform a series of acts connected with a particular business.

Examples include:

• business managers
• partners
• brokers
• factors

A general agent usually possesses wider authority because the position itself implies certain powers.

The distinction between general and special agents was explained in Jacob v. Morris [1902] 1 Ch 816, where it was observed that a general agent possesses authority usually attached to the position and the principal may be bound even when internal limitations exist.

Special Agent

A special agent is appointed for a specific act or a particular transaction.

Characteristics of a special agent include:

• authority is limited to a specific task
• acts beyond authority do not bind the principal
• authority ends once the task is completed

The distinction between general and special agents helps determine whether the principal is bound by the acts of the agent.

Authority of an Agent

The authority of an agent refers to the power of the agent to bind the principal in dealings with third parties.

When an agent acts within the scope of authority, the principal becomes legally bound by the agent’s acts.

This principle was recognised in Palestar Electronics Pvt Ltd v. Additional Commissioner, where the court observed that acts done by an agent within authority have the same legal consequences as if done by the principal personally.

Authority of an agent may take different forms.

Actual Authority

Actual authority is the authority given by the principal directly to the agent.

It can be divided into two categories:

Express Authority

Express authority is granted through spoken or written words.

A common example of express authority is a power of attorney.

In Syed Abdul Khader v. Rami Reddy, express authority granted through written authority was recognised by the court.

Other decisions such as Attwood v. Munnings, Reid v. Rigby, Ferguson v. Um Chand Boid, and Withington v. Herring illustrate how courts determine whether an agent has acted within the scope of express authority.

Implied Authority

Implied authority arises from:

• the nature of the agency
• the conduct of the parties
• customary practices of business

In Ramanathan v. Kumarappa, an estate agent was held to have implied authority to accept a deposit from a buyer.

However, implied authority does not extend to every act. In Foujdar Kameshwar Dutt Singh v. Ghanshyamdas, the court held that an agent cannot receive payment or give warranties unless authorised.

Apparent or Ostensible Authority

Apparent authority arises when the principal creates an impression that the agent has authority to act.

Even if actual authority does not exist, the principal may still be bound if third parties reasonably believe that authority exists.

Important decisions explaining this principle include:

• Valapad Co-operative Stores Ltd v. Srinivasa Iyer
• Pickering v. Busk
• Egyptian International Foreign Trade Co v. Soplex Wholesale Supplies Ltd
• Bissessardas Kasturchand v. Kabulchand

These cases highlight that apparent authority arises when the principal’s conduct leads third parties to believe that the agent has authority.

Usual or Incidental Authority

An agent may perform acts that are normally associated with the business entrusted to the agent.

In Watteau v. Fenwick, the court held that even an undisclosed principal could be liable for acts that are usual in the course of that business.

This principle protects third parties who rely on the ordinary authority of agents.

Authority in Emergency

Section 189 of the Indian Contract Act provides that an agent may act in emergency situations to protect the principal from loss.

In such situations, the agent may perform acts that a reasonable and prudent person would perform under similar circumstances.

The concept of emergency authority is related to situations discussed in Exall v. Partridge and Sachs v. Miklos, where actions taken out of necessity were recognised by the courts.

Rights of an Agent

The Indian Contract Act grants several rights to an agent to protect lawful acts performed on behalf of the principal.

The important rights include:

• Right of retainer
• Right to remuneration
• Right of lien
• Right to indemnity
• Right to compensation

Right of Retainer (Section 217)

Section 217 grants the agent the right to retain money received on behalf of the principal.

An agent may retain money to recover:

• advances made
• expenses incurred
• remuneration payable

This ensures that the agent does not suffer financial loss while performing duties.

The concept of retaining goods or money until lawful claims are satisfied was recognised in Leiboak Syndicate v. Finlay Fleming & Company and Hammonds v. Barclay.

Right to Remuneration (Sections 219–220)

An agent is entitled to remuneration for services performed on behalf of the principal.

Important principles include:

• remuneration becomes payable after completion of work
• reasonable remuneration may be given where no contract exists
• misconduct results in loss of remuneration

In Khursheed Alam v. Asa Ram, a broker was held entitled to compensation even though the purchaser was related to the agent.

Similarly, in Green v. Bartlett, commission was granted because the agent’s efforts led to the sale of the property.

Right of Lien (Section 221)

Lien refers to the right to retain property belonging to another person until payment is made.

An agent may retain the principal’s property until payment of:

• commission
• expenses
• remuneration

This principle was explained in Houghton v. Mathewas.

However, the right of lien may be lost when:

• possession of the property is lost
• the agent waives the right
• the contract excludes lien

The limitation of lien was discussed in Williams v. Millington.

Right to Indemnity (Sections 222–223)

An agent has the right to be indemnified by the principal for losses suffered while performing authorised acts.

Indemnity applies in two situations:

1. Lawful acts performed within authority

2. Acts performed in good faith under the instructions of the principal

In Kishan Lal v. Bhanwar Lal, the court recognised the right of the agent to recover losses incurred while acting on behalf of the principal.

Right to Compensation (Section 225)

An agent may claim compensation when injury is caused due to the principal’s negligence or lack of skill.

For example:

• the principal fails to provide necessary instructions
• the principal’s negligence causes loss to the agent

Compensation generally covers direct consequences of such negligence.

Duties of an Agent

Along with rights, the Indian Contract Act imposes several duties on the agent.

These duties ensure that the agent acts honestly and protects the interests of the principal.

Important duties include:

• duty to follow instructions
• duty to exercise reasonable care and skill
• duty to maintain accounts
• duty to avoid conflict of interest
• duty not to delegate authority
• duty to remit sums received

Duty to Follow Instructions (Section 211)

An agent must conduct business according to the instructions of the principal.

If instructions are absent, the agent must follow the customs of that business.

Failure to follow instructions may make the agent liable for resulting loss.

In Lilley v. Doubleday, the agent stored goods at a different warehouse than instructed and was held liable for the loss.

Duty to Exercise Reasonable Care and Skill (Section 212)

An agent must perform duties with reasonable care, skill, and diligence.

Negligence or lack of skill may make the agent liable for losses suffered by the principal.

In Wheeler v. Keppel, the agent failed to communicate a better offer and was held liable for the loss caused to the principal.

Similarly, Pannalal Jankidas v. Mohanlal emphasised that an agent is responsible for direct consequences of negligence.

Duty to Maintain Accounts (Section 213)

An agent must maintain proper accounts of all transactions conducted on behalf of the principal.

The principal has the right to demand such accounts.

In S. Paul & Co v. State of Tripura, the importance of maintaining accounts was recognised.

The case of Yasuda Fire and Marine Insurance Co v Orion Marine Insurance Underwriting Agency Ltd further emphasised the duty to provide proper accounts and inspection.

Duty to Avoid Conflict of Interest (Sections 215–216)

An agent must not place personal interest above the interest of the principal.

If the agent secretly benefits from a transaction:

• the principal may cancel the transaction
• the principal may claim the benefit gained by the agent

Important decisions include:

• Boulton Bros & Co Ltd v New Victoria Mills Co Ltd
• De Busche v Alt
• Jaiswal Coal Co v Fatehganj Co-op MKTG Society
• Harris (L.S.) Trustees Ltd v Power Packaging Services Ltd

These cases emphasise the importance of honesty and loyalty.

Duty Not to Delegate Authority (Sections 190–195)

An agent must perform duties personally.

The rule is commonly expressed as delegatus non potest delegare, meaning a delegate cannot further delegate.

However, delegation may be allowed when:

• the principal permits it
• custom of trade allows it
• it is necessary for performance
• the act is ministerial

In John McCain & Co v Pow, the claim of a sub-agent was rejected because the agent had no authority to appoint a sub-agent.

Duty to Remit Sums Received (Section 218)

An agent must pay to the principal all sums received on the principal’s behalf.

In Sri Konathala Venkata Raman v State of Andhra Pradesh, the court held that money received by the agent must be returned to the principal.

Similarly, Shivram Govind Darshane v Viswanath Govind Darshane emphasised the obligation to remit sums received.

Conclusion

The law of agency plays a vital role in commercial and legal transactions. It allows individuals and businesses to act through representatives while maintaining legal accountability.

An agent represents the principal in dealings with third parties and may create binding legal obligations for the principal. Because of this responsibility, the law grants several rights to the agent while also imposing duties that ensure honesty, diligence, and loyalty.

Rights such as retainer, remuneration, lien, indemnity, and compensation protect the agent when performing lawful acts. Duties such as obedience, care, accounting, loyalty, and remittance of funds protect the interests of the principal.

Thus, the law of agency creates a balanced framework that ensures fairness, accountability, and efficiency in transactions conducted through agents.

Note: This article was originally written by Tanu Kapoor (Student, Rajiv Gandhi National University of Law) on 27 February 2020. It was subsequently updated by the LawBhoomi team on 13 March 2026.