Agent

What is an Agent?

An **agent** is a person who is authorised to act on behalf of another person — called the **principal** — in dealings with third parties. The relationship between an agent and a principal is called **agency**. When an agent acts within the scope of their authority, the legal consequences of their actions fall on the principal, not on the agent personally.

In everyday terms, when you hire a real estate broker to sell your property, the broker acts as your agent. They negotiate with buyers, show the property, and may even sign certain documents on your behalf. Any deal they make within the authority you granted them binds you as if you had made the deal yourself.

Legal Definition and Framework

Agency law in India is primarily governed by **Chapter X (Sections 182 to 238)** of the **Indian Contract Act, 1872**.

Key Statutory Provisions

- **Section 182:** Defines an "agent" as 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."

- **Section 183:** Any person who is of the age of majority and of sound mind may employ an agent. Importantly, **Section 184** provides that any person may become an agent — even a minor or a person of unsound mind — because the agent's acts bind the principal, not the agent personally.

- **Section 185:** No consideration is necessary to create an agency. The authority itself is sufficient consideration for the agent's obligation to act.

- **Section 186-187:** Defines the **authority** of an agent, which may be **express** (given in writing or by words spoken) or **implied** (inferred from the circumstances of the case, the conduct of the parties, or the nature of the business).

Types of Agents

Indian law recognises several categories of agents:

- **General Agent:** Authorised to do all acts connected with a particular trade, business, or employment. For example, a managing partner of a firm is a general agent of the firm.

- **Special Agent:** Authorised to do a specific act or represent the principal in a specific transaction. For example, a person authorised to sell one particular property.

- **Universal Agent:** Authorised to do all acts the principal can lawfully do and can delegate. This is rare and typically created through a comprehensive power of attorney.

- **Sub-Agent (Section 191):** An agent appointed by the original agent to assist in performing the agency. The principal is bound by the acts of a properly appointed sub-agent.

- **Broker (Section 185, read with mercantile custom):** An agent whose business is to negotiate contracts between parties.

- **Factor:** An agent entrusted with the possession of goods for the purpose of selling them.

- **Del Credere Agent:** An agent who guarantees the performance of the contract by the third party in exchange for additional commission.

- **Auctioneer:** An agent authorised to sell goods or property by public auction.

Authority of an Agent

The scope of an agent's power is determined by their **authority**, which has several dimensions:

- **Express Authority (Section 186):** Authority specifically given by the principal, whether orally or in writing.

- **Implied Authority (Section 187):** Authority to do every lawful thing necessary for, or ordinarily done in the course of, conducting the authorised business.

- **Apparent or Ostensible Authority (Section 237):** Where an agent, without the principal's authority, does acts that create an impression that the agent has authority, and a third party relies on that impression in good faith, the principal may be bound.

- **Authority in Emergency (Section 189):** An agent has authority to do all such acts as a person of ordinary prudence would do for protecting the principal from loss in an emergency, even without express instructions.

When Does This Term Matter?

Binding the Principal

The core legal consequence of agency is that the **principal is bound by the agent's acts** performed within the scope of authority. Under **Section 226**, contracts entered into through an agent are enforceable against the principal. This means:

- If your property dealer (agent) signs a sale agreement on your behalf within their authority, you are bound by that agreement.

- If your stockbroker (agent) makes a trade within the instructions you gave, you bear the profit or loss.

Agent's Duties to the Principal

An agent owes several duties to the principal under the Indian Contract Act:

- **Section 211:** Duty to follow the principal's directions or, in the absence of directions, to act according to the custom of the place.

- **Section 212:** Duty of skill and diligence — the agent must exercise the same care as a person of ordinary prudence would in their own case.

- **Section 213:** Duty to render proper accounts.

- **Section 215:** Duty not to deal on their own account — the agent must not use information obtained during the agency for personal gain.

- **Section 216:** Duty to remit sums received — the agent must pay to the principal all sums received on the principal's account.

Agent's Liability to Third Parties

Generally, an agent is **not personally liable** to third parties for contracts entered into on behalf of a disclosed principal. However, the agent becomes personally liable under **Sections 226-237** in certain situations:

- When the agent contracts in their own name without disclosing the principal.

- When the agent acts beyond their authority.

- When there is a trade custom making the agent personally liable.

- When the agent expressly agrees to be personally liable.

Termination of Agency

Agency may be terminated under **Sections 201-210**:

- By revocation by the principal (Section 203).

- By renunciation by the agent (Section 206).

- By completion of the business of agency.

- By death or insanity of the principal or agent (Section 209).

- By the principal becoming insolvent (Section 201).

**Irrevocable Agency (Section 202):** Where the agent has an interest in the subject matter of the agency, the agency cannot be terminated to the prejudice of such interest.

Practical Significance

- **Power of Attorney** is the most common written instrument creating an agency relationship in India, frequently used for property transactions, banking, and legal representation.

- **Real estate agents and brokers** operate as agents, and their authority to bind the principal should be clearly defined in writing to avoid disputes.

- **Company directors and officers** act as agents of the company, and their authority is governed by the Companies Act, 2013, and the company's Articles of Association.

- **Always define authority clearly** — disputes frequently arise when an agent exceeds their authority, leaving the principal bound by unwanted obligations.

Frequently Asked Questions

Can a minor be an agent?

Yes. Under **Section 184 of the Indian Contract Act**, as between the principal and third persons, any person may become an agent. Since the agent's acts bind the principal and not the agent personally, the agent's contractual capacity is irrelevant. However, a minor agent cannot be held personally liable by the principal for breach of the agency agreement, because a minor cannot enter into a valid contract. In practice, appointing a minor as an agent is inadvisable because of the complications arising from the minor's inability to be personally held accountable.

What is the difference between an agent and a servant (employee)?

An **agent** represents the principal in dealings with third parties and has the authority to create legal relations between the principal and third persons. A **servant or employee** works under the control and direction of the employer but does not typically have the authority to create legal relations on behalf of the employer with third parties. The distinction matters for vicarious liability — while employers are vicariously liable for the acts of both agents and employees done in the course of employment, the scope of authority and the nature of legal relations created differ significantly.

Is a lawyer an agent of their client?

A lawyer (advocate) has a dual status. They are an agent of the client to the extent that they represent the client in legal proceedings and their acts in court bind the client. However, a lawyer is also an officer of the court and has duties that go beyond those of an ordinary agent — they cannot mislead the court, suppress material facts, or act solely in the client's interest when doing so would involve professional misconduct. The **Advocates Act, 1961** and the Bar Council of India rules impose obligations on lawyers that modify the ordinary principal-agent relationship.

What happens when an agent exceeds their authority?

When an agent acts beyond their authority, the **principal is not bound** by the unauthorised acts (Section 227). However, the third party who dealt with the agent in good faith may have a claim against the agent personally for breach of warranty of authority. The principal may also **ratify** the agent's unauthorised act under **Sections 196-200**, thereby retroactively approving it — but ratification must be of the entire act and must be done with full knowledge of all material facts.