Unit III — Agency

“He who does an act through another does it himself” — qui facit per alium facit per se. — the maxim underlying the law of agency

Creation of Agency & the Agent’s Authority

An agent (S.182) is a person employed to do any act for another or to represent another in dealings with third persons; the person represented is the principal. The defining feature is the power to bind the principal to third parties. Agency may be created by express or implied agreement (S.187), by estoppel (holding out), by ratification (S.196), by operation of law, or by an agency of necessity (S.189).

flowchart TD
    A["AGENT'S AUTHORITY"]:::root
    A --> B["ACTUAL authority<br/>(express S.187 or implied)"]:::leaf
    A --> C["APPARENT / OSTENSIBLE<br/>(estoppel, holding out)"]:::leaf
    A --> D["AGENCY OF NECESSITY<br/>(S.189 — emergency)"]:::leaf
    A --> E["Authority in EMERGENCY<br/>to protect principal from loss"]:::leaf

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    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
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A sub-agent properly appointed binds the principal as regards third parties, but the agent remains responsible to the principal for the sub-agent’s acts (S.192); a substituted agent, by contrast, is the principal’s own agent. Ratification (S.196–200) lets a principal adopt an unauthorised act done on his behalf — it must be of the whole act, by a competent and disclosed principal, and cannot prejudice a third party’s vested rights.

Principal–Agent–Third Party & Termination

An agent who acts within authority binds the principal; if he exceeds it, the principal is bound only as to the part within authority where severable (S.227). A disclosed principal is directly liable; under the doctrine of the undisclosed principal (S.231–232) the third party, on discovering him, may sue either the agent or the principal. An agent is personally liable where he so agrees, where he acts for a foreign or undisclosed principal, or where the principal cannot be sued. Termination (S.201) occurs by revocation by the principal, renunciation by the agent, completion of the business, death or insanity of either, or the principal’s insolvency — but an agency coupled with an interest (S.202) is irrevocable to the prejudice of that interest.

✏️ Sample Solved Problem (IRAC Method)

Problem: P instructs his agent A to sell goods only for cash. A sells them on credit to C, a buyer who later becomes insolvent. P sues A. Is A liable?

I — Issue

Whether an agent who disobeys the principal’s lawful instructions is liable for the loss that results.

R — Rule

• Section 211 — an agent must conduct the business according to the directions of the principal; on departing from them he must make good any loss sustained.
• Section 212 — an agent must act with reasonable skill and diligence and is liable for loss caused by his neglect.

A — Analysis

The seductive argument is that selling is selling, and a sale on credit is still a sale within A’s general authority to dispose of the goods. But the principal’s instruction was specific and lawful — cash only — and that instruction defines the limit of A’s actual authority. By selling on credit A stepped outside his mandate; the buyer’s insolvency is precisely the risk a “cash only” direction was meant to avoid. The loss flows directly from the disobedience, so causation under S.211 is satisfied. A cannot shelter behind his general authority because an express instruction overrides any implied power.

C — Conclusion

A is liable to P for the price of the goods. An agent who disobeys clear and lawful instructions must make good the resulting loss under S.211, and the buyer’s insolvency falls on the disobedient agent, not the principal.

📄 The full bundle (₹199) has the complete Unit III — creation of agency, every kind of agent, ratification, the undisclosed principal and all modes of termination — plus the Question Bank’s model answers to the ratification, agency-of-necessity and personal-liability problems. Get Notes + Question Bank — ₹199