Rights and duties of an agent

1. Duties of the agent

(a) To follow directions or custom, section 211. An agent is bound to conduct the business of his principal according to the principal's directions or, in their absence, according to the custom prevailing in doing business of the same kind at the place where the agent conducts it. When he acts otherwise, if any loss is sustained he must make it good, and if any profit accrues he must account for it. Illustration (a): A, an agent engaged in carrying on for B a business in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investment. A must make good to B the interest usually obtained by such investments.

(b) Reasonable skill and diligence, section 212. An agent must conduct the business with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. He must always act with reasonable diligence and use such skill as he possesses, and must compensate the principal for the direct consequences of his own neglect, want of skill or misconduct, but not for indirect or remote loss. Illustration: A, a merchant in Calcutta, has an agent B in London, to whom a sum is paid on A's account with orders to remit. B retains the money for a considerable time. A, in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest, but not for further loss caused by the insolvency.

(c) To render accounts, section 213. An agent is bound to render proper accounts to his principal on demand.

(d) To communicate with the principal, section 214. In cases of difficulty, the agent must use all reasonable diligence in communicating with his principal and in seeking to obtain his instructions.

(e) Not to deal on his own account, sections 215 and 216. If an agent deals on his own account in the business of the agency without first obtaining the principal's consent and acquainting him with all material circumstances, the principal may repudiate the transaction if the case shows that any material fact was dishonestly concealed or the dealings were disadvantageous to him (section 215). Illustration: A directs B to sell A's estate; B buys it himself in the name of C; A, on discovering this, may repudiate the sale. Section 216: if an agent, without the principal's knowledge, deals in the business of the agency on his own account instead of on the principal's, the principal is entitled to claim any benefit which has resulted to the agent from the transaction.

(f) Not to make a secret profit. This follows from section 216 and from the fiduciary position. An agent who takes a secret commission from the other side must account for it and forfeits his own commission: Andrews v. Ramsay & Co. (1903). The principal may also dismiss him and avoid the contract.

(g) To pay over sums received, section 218. Subject to his deductions, the agent must pay to the principal all sums received on his account.

(h) Not to delegate (section 190; see section 4 below), and, on the death or insanity of the principal, to take all reasonable steps to protect and preserve the interests entrusted to him (section 209).

2. Rights of the agent

• Remuneration, section 219. In the absence of a special contract, payment for the performance of any act is not due to the agent until the completion of the act. He may be entitled to commission once he has brought about the result for which he was engaged, even if the principal later backs out, but he earns nothing for effort that produces nothing (Luxor (Eastbourne) Ltd. v. Cooper, 1941, on commission payable only on completion of sale). Section 220: an agent guilty of misconduct in the business of the agency is not entitled to remuneration for that part of the business he has misconducted. Illustration: A employs B to recover Rs 1,00,000 from C and lay it out on good security. B recovers the money and lays out Rs 90,000 on good security and Rs 10,000 on security he ought to have known was bad. B is entitled to remuneration for recovering the money and investing the Rs 90,000, but not for the Rs 10,000.
• Retainer, section 217. An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred in conducting the business, and such remuneration as may be payable for acting as agent.
• Lien, section 221. In the absence of a contract to the contrary, an agent is entitled to retain goods, papers and other property, movable or immovable, of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for. This is a particular lien; factors have a general lien under section 171.
• Indemnity for lawful acts, section 222. The employer of an agent is bound to indemnify him against the consequences of all lawful acts done in exercise of the authority conferred on him.
• Indemnity for acts done in good faith, section 223. Where one person employs another to do an act, and the agent does it in good faith, the employer is liable to indemnify him against the consequences, though it causes injury to the rights of third persons. Illustration (a): B, at A's request, sells goods in A's possession which A had no right to dispose of. B does not know this and hands over the proceeds to A. C, the true owner, sues B and recovers the value and costs. A must indemnify B.
• No indemnity for criminal acts, section 224. The employer is not liable to indemnify the agent against the consequences of a criminal act, even if he promised to. Illustration: A employs B to beat C and agrees to indemnify him. B beats C and has to pay damages. A is not liable to indemnify B.
• Compensation for the principal's neglect, section 225. The principal must compensate the agent for injury caused to him by the principal's neglect or want of skill. Illustration: A employs B as a bricklayer in building a house and puts up the scaffolding himself. The scaffolding is unskilfully put up and B is hurt. A must compensate B.

3. Duties of the principal, summarised

Read the rights above from the other side: to pay remuneration (s.219), to allow retainer and lien (ss.217, 221), to indemnify for lawful and good faith acts (ss.222, 223), and to compensate for his own neglect (s.225).

4. Delegation: delegatus non potest delegare

An agency is a relationship of personal confidence. The principal chose this agent for his skill and integrity, so the agent cannot hand the work to someone else. Section 190 states the rule: an agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally. De Bussche v. Alt (1878) is the leading English statement.

The exceptions, from section 190 and the cases:

• where the ordinary custom of trade permits a sub-agent;
• where the nature of the agency requires it (a company acting through its officers; work at distant places);
• where the principal expressly or impliedly permits it, including the naming of a substituted agent under section 194;
• acts that are purely ministerial and involve no discretion (signing or posting a letter);
• an emergency in which delegation is needed to protect the principal (section 189).

The consequences of proper and improper delegation are in sections 192 and 193: if the sub-agent is properly appointed, the principal is bound and the agent answers to the principal for him; if improperly appointed, the principal is not bound by his acts and the agent alone is responsible.

5. Problem

A appoints B to sell his car for at least Rs 5 lakh. B, without telling A, buys it himself for Rs 5 lakh through his brother-in-law, and sells it a week later for Rs 6 lakh. What can A do?

Issue. Whether an agent who deals on his own account in the business of the agency must give up the profit.

Law. Section 215 lets the principal repudiate a transaction where the agent deals on his own account without disclosure. Section 216 entitles the principal to any benefit the agent gains from such a dealing.

Application. The purchase through a relative was a dealing on B's own account concealed from A. Since the car has been resold to a third party, repudiation may not be practical, but section 216 gives A the profit.

Conclusion. A can recover the Rs 1 lakh profit from B, and B is not entitled to commission on the sale (section 220).

How this is examined

“Explain the rights and duties of an agent” was set in January 2026. Write the duties with section numbers and one illustration each for sections 211, 212 and 215, then the rights (sections 217 and 219 to 225). Delegation is a frequent short note: state the maxim, section 190, the exceptions and sections 192 and 193.