Law of Agency Example

There was no breach of the agent’s duty in appointing a sub agent because there was an express consent to such delegation. b) Where it is presumed from the conduct of the parties that the agent would have power to delegate his authority. c) Where custom of the trade or business permits delegation d) In case of necessity or unforseen emergency e.g.: illness of agent


The duties of a principal to his agent include:

1. To pay commission or remuneration to the agentThe principal has to pay the agent his commission or remuneration as agreed in the contract between them. The agent will lose his right to remuneration if the agent is guilty of misconduct in the business of agency. (Section 173)

2. Not to willfully prevent or hinder the agent from earning his commission When a principal has appointed a person to be his agent, he cannot employ a second agent to do the same act as the first agent. This is to protect the first agent from not getting the commission that has been promised to him by the principal.

3. To indemnify and reimburse the agent for acts done in the exercise of his duty. The principal has the duty to indemnify the agent for all losses and liabilities that the agent incurred while he performs his duty.


Sections 154 to 163 of Contract Act provides for:An agency may be terminated in the following situations:-1)By act of the parties2)By operation of law

1) By Act of the partiesAn agency contract may be terminated by mutual consent or by unilateral revocation by the principal or unilateral renunciation by the agent at any time by giving reasonable notice.

2) Termination by Operation of Law.An agency may be revoked by operation of law in any of the following circumstances:-

a) Termination by performanceThe contract of agency came to an end when the agent has performed the contract. b) Termination upon expiry of the period fixed in the contract of agency. c) Upon the death of the principal or agent.

An agency came to an end when the principal or the agent dies. d) When the principal or agent has become insanee) When the principal or agent has been declared bankrupt f) Termination by frustrationUpon happening of an event which renders the agency unlawful, the agency may be terminated. CASE: Stevenson v Aktiengesellschaf Fur Cartonnagen Industries [1918] An outbreak of war made principal an enemy alien.

It was held that the agency was terminated.