Various Duties of an Agent towards his Principal

An agent is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such act is done or who is so represented, is called the “principal”-Section 182 of the Indian Contract Act).

The principle of ‘Qui facit peralium facit per se’ is basis of the relation of agency. This principle means that the act of an agent is the act of the principal.

The agent has the following duties towards his principal:

1. Duty to follow directions or customs:-An agent is bound to carry out the business- entrusted to him according to the directions of principal. In the absence of his directions the agent must follow the customs prevailing in the business of the same kind at the place. If the agent makes any departure from the instructions of the principal or the custom, he does so at his own risk. (Section 211, Indian Contract Act). The agent is, however, not bound to take any separate or special care (Padam Parshad v. The Punjab National Bank Ltd., AIR 1974 P & H 22).

Illustration

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 investments. A must make good B, the interest usually obtained by such investment.

2. Duty to take reasonable care and skill:-An agent must conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business unless the principal has a notice of his want of skill. The agent is always bound to act with reasonable diligence. The agent will have to make compensation to his principal for any direct loss or damage arising from his own neglect, want of skill or misconduct (Section 212, Indian Contract Act).

3. Duty to keep accounts:-An agent is bound to render proper accounts to his principal on demand (Section 213, Indian Contract Act).

4. Duty to behave like a man of ordinary prudence:-An agent is bound, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instruction. (Section 214, Indian Contract Act). In case there is no time to consult the principal, he may act with the discretion of an ordinary prudent man.

5. Duty to avoid conflict of interests:-When an agent deals, on his own account, in business of agency without principal's consent the principal may repudiate the transaction if the case shows either that any material fact has "been dishonestly concealed from him by the agent or that the dealings of agent have been disadvantageous to him (Section 215, Indian Contract Act).

Illustration

A directs B to sell A's estate. B buys the estate for himself, in the name of C. A on discovering that B has bought the estate for himself, may repudiate the sale if he can show that B has dishonestly concealed any material facts, or that the §ale has been disadvantageous to him.

6. Duty to hand over secret profits or duty not to earn' secret profits:-If the agent, without the knowledge of his principal, deals in the business of the agency on his own account the principal is entitled to claim from him any profit which has resulted from the transaction (Section 216, Indian Contract Act).

7. Duty to give all sums received under agency:-An agent is bound to pay to his principal all sums received on his account subject to deduction, such as, money due to himself in respect• of advance made or expenses properly incurred, and also the remuneration due to him (Section 218, Indian Contract Act).

8. Duty not to delegate:-As a general rule an agent has no right to delegate his authority to a third person without the consent of his principal except in cases where the very nature of the business may require the delegation of authority. (Section 190, Indian Contract Act).

9. Duty to protect the interest entrusted to him on death or insanity of principal:-An agent is bound to take on behalf of the representatives of his late principal all reasonable steps for the protection and preservation of the interest entrusted to him when an agency is terminated by the death or insanity of the principal (Section 209, Indian Contract Act).

Courtesy:- Legal Point Foundation