This article has been written by Khushi Gupta.

Abstract

This article analyses in detail the contractual relationship between the agent and the principal as mentioned in the Chapter X of the Indian Contract Act, 1872. According to Section 182, of the said Act, an agent is a person employed to act on behalf of a person, namely principal and represents him in dealing with the third person. Their relationship is based on the Latin maxim, “Qui Facit per alium facit per se”, means, “he who acts through another is deemed in law to do it himself”. Further, this article illustrates the rights, liabilities and duties of an agent and principal per se as well as those of third person. It also embodies the different modes of creation of the agency and the different types of commercial agents. It helps us to understand how sub-agents are different from substituted agents. Lastly, it analyses the different methods of revocation of the agency. 

Introduction: what is agency?

Agency is defined as a relationship where one party, namely the principal, who delegates some authority to another party, namely agent to represent him or to act on his behalf, in dealing with a third person, as to create a binding legal relationship between the former and the third party. 

The essential point about an agent’s position is his power of making the principal answerable to third persons. The act of the agent binds the principal in the same manner in which he would be bound if he does the act himself. A person does not become an agent on behalf of another merely because he gives him advice in matters of business. The test of the agency is whether the person has expressed or implied consent to enter into the transaction on behalf of the principal or not. Relationships involving principal and agent involve three parties: principal, agent and third party. 

In National Textile Cooperation Ltd vs. Nareshkumar Badrikumar, 2011 Supreme Court observed that the expression ‘agency’ is used to connote a relation that exists where one person has authority or capacity to create legal relation between the person occupying the position of principal and third party. 

The Chapter X of the Indian Contract Act, 1872 embodies the law relating to principal and agent. This chapter deals with the rights and liabilities and duties of principal and agent inter se as well as those of third parties. 

Who is an agent?

As defined in Section 182 of the Indian Contract Act, 1872, an agent is a person employed to do any act for another, or to represent others in dealings with third parties and the person for whom such act was done or who was so represented was so-called “the principal”. An agent is merely an extended hand of the principal and cannot claim independent rights. 

The Court said in Loon Karan Sohan Lal vs. John and Co, that it was well settled that for the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word “agent” was not conclusive. 

Certain persons are referred to in common parlance as ‘agents’ even though they may not really have this power of changing their principal’s relationship with third parties. Distributors and franchisees are normally referred to as agents, though they may actually act as principals dealing in their own name. the determination of whether the relationship between the parties is that of agency or of conceptually anything else (though apparently similar) will depend upon the facts of each case. 

Who is a principal?

According to Section 182, of the Indian Contract Act, 1872, a principal is a person who delegates authority to another person namely, the agent.

Illustration – A who resides in Mumbai, has a shop in Kolkata which is looked after by a person B whom he has hired. Here A is the principal who has delegated his authority to a person, B who acts as his agent.

Different kinds of agency

Depending on the kind of authority given to the agent to act on behalf of the principal, the various kinds of Agents are:

• Auctioneers– An auctioneer is a mercantile agent within the meaning of Section 2(9) of the Sale of Goods Act. He is basically an agent whose business is to sell goods and other property by auction, i.e., by open sale. He only has the authority to sell the goods vested in him and not to give warranties on behalf of the seller unless expressly authorized by his principal. 
• Factors – A factor is a mercantile agent who is entrusted with the possession of goods for the purpose of sale. According to Section 171 of the Contract Act, a factor has a right of general lien over the goods belonging to his principal, which are in his possession, for the general balance of the account. 
• Brokers – A broker is an agent who has any authority to negotiate the sale or purchase of goods on behalf of his principal, with a third person. Unlike a factor, he himself has no possession of goods. He merely makes the two parties enter into a contract. He gets his commission whenever any transaction materializes through his efforts. 
• Del Credere Agents – They are mercantile agents, who, on the payment of some extra commission guarantees the performance of the contract by the third person. The liability of the del credere agent, like that of a surety, is secondary and the same arises if the third person fails to pay to the principal what is due under the contract.

Some features of a contract of agency 

The principal should be competent to contract (Section 183)

According to Section 11 of the Indian Contract Act, 1872, the prerequisites of a valid contract is the competency of the parties to contract. Since, in an agency, the agent creates a contractual relationship between his principal and the third party, therefore, it is mandatory that the principal and the third party should be competent to contract. 

The court, in Syed Abdul Khader vs. Rami Reddy, held that the relation of agency arises whenever one person called the agent has authority to act on behalf of another person, called the principal and the latter consents to do so. The relationship has its genes in its contract.

Although a minor himself cannot appoint an agent, there is nothing in Section 183, which prohibits the guardian of a minor from appointing an agent for him.

When a client gives power of attorney to his counsel, while he is in a good state of health and mention condition, but subsequently there is a change in the state of health and mental infirmities due to old age, the power of attorney becomes worthless.

The agent may not be competent to contract (Section 184)

The capacity of an agent could be looked at from two angles:

1. Firstly, the capacity of an agent to act on behalf of the principal, so as to bind his principal and third person – As far as the agent’s capacity to bind the principal and the third person is concerned, for that, any person may become an agent. It means that even if an agent is minor or otherwise incompetent to contract, he is capable of creating a valid contract between his principal and the third person. In this context, the agent is only a connecting link between the principal and the third party.
2. Agent’s capacity to bind himself by a contract between himself and his principal – So far as the agent’s capacity to bind himself to the principal is concerned it is not necessary that the agent should also be competent to contract. But in such cases, the agent will himself be not responsible for his acts to the principal. 

No consideration is necessary to create an agency (Section 185)

The law does not require any consideration as such for the validity of a contract of agency. The principal agrees to be bound by the acts done by the agent on his behalf and that serves as a sufficient detriment to the principal.

Generally, an agent is remunerated by way of commission for services rendered, but no consideration is immediately necessary at the time of his appointment. For example, where a person undertook to become an agent for the sale of land of Mr A, the person is not paid at the time of his appointment. He is only paid after the purpose of the appointment has been fulfilled. But merely gratuitous employment or authority does not bind the agent to do anything. 

Modes of creation of an agency 

• By actual authority conferred on the agent to act on behalf of the principal. Such authority may be either expressed or implied;
• By agent’s authority to act on behalf of the principal in a situation of ‘emergency’;
• By the conduct of the principal, which creates an agency on the basis of Law of Estoppel;
• By ratification of the agent’s act by the principal, even though the same has been done without the principal’s prior authority; and
• By presumption of agency in husband–wife relationship. 

Acts done with principal’s actual authority 

Section 186 of the Indian Contract Act, 1872 states that the agent’s authority may be expressed or implied. Further, Section 187 of the said act illustrates the meaning of express and implied authority. In order to create an agency, the use of the word ‘agent’ or ‘agency agreement’ is not necessary. The relationship of principal and agent can only be established by consent of both of them.  This consent can either be expressed or implied:

• Express Authority – An authority is said to be expressed when it is given by words spoken or written. In Heard vs. Pilley, the court held an oral appointment is also valid even though the contract which he is authorized to make has to be in writing.
• Implied Authority – It arises from the conduct, situation or relation between the parties. “The ordinary course of affairs” must be regarded to ascertain the extent of an authority not defined by the principal. Further, Section 188 of the Act illustrates the extent of Implied Authority. The limitations of this incidental authority of an agent are: 

1. To do every lawful thing.
2. Such lawful things must be necessary or usually done in the course of such act or business. 

If the act is not lawful or not necessary or is not necessary or is not usual in such matters, that would fall outside his authority. It is well settled that an agent’s authority is, in Story’s words: “construed to include all the necessary and usual means of executing it”. 

In Ormrod vs. Crosville Motor Service Ltd, the court held a permission made to a person to ferry a car from one place to another makes him an agent for that limited period so as to create liability for consequences of negligent driving.

Agent’s authority in an emergency (Section 189)

The rule contained in this Section is known as the rule relating to “authority of necessity”. The prior rules lay down duty or restrictions on the powers or authority of an agent. In an emergency whose rules become inapplicable during emergency. This Section may apply where in an emergency it is not possible to communicate with the principal or as a result of steep rise or fall of the market rate if instructions to sell or purchase were carried out the principal may be put to a loss. This Section, therefore, lays down a very sensible and sound rule of acting prudently as it were a personal case of the agent himself.

In Sims and Co. v. Midland Railway Company, a quantity of butter was consigned with the defendant railway company. It was delayed in transit owing to a strike. The goods being perishable, the company sold them. 

The sale was held binding on the owner, the companies’ action was justified by the necessities of the case and it was also not possible to get instructions from the owner. 

Principal bound by estoppel (Section 237)

Sometimes, the agent is neither vested by express or implied authority by the principal to act on his behalf, but the principal through his acts and conduct creates an impression in the mind of the third party that the agent has the authority to act on his behalf. In such a case, the principal is liable towards the third person for the acts done by the agent, on the ground of the application of the law of estoppel. The basis of the action is what appears to the third person to be an authority, i.e., apparent or ostensible authority conferred on the agent.

Notice of excess of authority – No act done by an agent which was unauthorized by the principal will be binding on the latter. In Ram Pertab vs. Marshall, the Privy council observed that the principal was liable upon a contract entered into by his agent in excess of his authority, the evidence showing that the contracting party might honestly and reasonably have believed in existence of authority to the extent apparent to him. 

Agency by ratification (Section 196 – 200)

When an act has been done by the agent on behalf of the principal though without his authority or knowledge, the principal has two option:

1. To disown the act; or 
2. To ratify the same.

An agent untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with such agent, is liable if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred.

Essentials of valid ratification

1. The act should be done on behalf of another person and it should be ratified by the person on whose behalf the act has been done. (Section 196)
2. The principal should be in existence, and competent to contract when the act is done.
3. Ratification may be expressed or implied. (Section 197)
4. Ratification should be with full knowledge of the facts. (Section 198)
5. Ratification should be of the whole transaction. (Section 199)
6. Ratified acts should not be injurious to the third person. (Section 200)
7. Ratification within a reasonable time. 

The validity of a ratified act relates back to the time of doing it. The effect of ratification of a contract entered into by the agent without the principal’s prior authority is, that the contract is deemed to have been made when the agent made the agreement rather than the date of ratification by the principal of that agreement. 

A pertinent question was raised if Mr. A entered into an agreement on 2nd January with Mr. C (the agent of Mr. D), Mr. D ratified the agreement on 5th January. Can Mr. A revoke the agreement before it is ratified by Mr.D.? It was answered in the negative in the Bolton Partners vs. Lambert. It was stated that execution relates back to the time when the contract was entered into by the agent. 

The position would be different if the agent purports to make the contract ‘subject to ratification by the principal, or the other contracting party knows about the limitation of agent’s authority. In such a case, the date of ratification is regarded as the date of entering into the contract, and there can possibly be revocation before ratification by the principle. 

Agency in husband-wife relationship 

This is a special and important case of implied authority. A married woman cohabiting with her husband is presumed to have the power to pledge the credit of her husband for necessaries. She is entitled to receive goods and services which may be required for domestic use or which may be of her husband, herself or the children. If such goods or services are necessary, according to the condition of life of the family, the husband becomes bound to pay for them. 

In Viraswami vs. Appaswami, the court stated, “a person dealing with a wife and seeking to charge her husband must show either that the wife is living with her husband and managing household affairs – in which case an implied agency to buy necessaries is presumed – or he must show the existence of such a state of things as would warrant her in living apart from her husband and claiming support or maintenance, when, of course, the law could give her an implied authority to bind him for necessaries supplied to her during such separation in the event of his not providing her with maintenance”. 

There is no agency of necessity in respect of husband-wife relationship, in India, because the right of maintenance of the wife is governed by the personal law applicable to the parties. 

Sub-agent 

According to the Latin maxim, ‘Delegatus non potest delegare’, delegated authority cannot be further delegated. According to Section 190, an agent cannot delegate his authority to someone else unless by the ordinary custom of trade or business it is necessary to employ a sub-agent. 

According to Section 191, a “sub-agent” is a person employed by and acting under the control of, the original agent in the business of the agency. Also, Section 192, further illustrates that the sub-agent is responsible to the agent in the same way as the agent is responsible to the principal for the acts of the sub-agents. The sub-agent, but not the principal, except in cases of fraud or willful wrong. Although the sub-agent is not responsible to the principal but the acts of a sub-agent who is properly appointed, he gets vested with the power to represent the principal, and therefore, for the acts of a sub-agent, the principal becomes bound towards third persons. 

When the agent makes the appointment of a sub-agent without having the authority to do so, the principal is not represented by or responsible for acts of the sub-agent. It means that for the acts of the sub-agent, the principal will not be bound towards any third person. 

Sub-agent and substituted agent distinguished 

• A sub-agent is an agent’s agent, whereas, a substituted agent is the principal’s agent in conducting the agency work. An agent is responsible for the acts of the sub-agent. A principal is only responsible for the acts of the sub-agent in case of fraud or willful wrong, whereas, in the case of a substituted agent, the principal is responsible. 
• After appointing a sub-agent, the agent continues to be responsible for the acts of the sub-agent towards the principal. An agent’s responsibility, on the other hand, is over when he names a substituted agent. He then goes out of the picture. 

Rights of an agent 

• To do all lawful things needed for the purpose. (Section 188) 
• In an emergency, to act prudently to protect the principal. (Section 189) 
• To appoint an agent for principal, substituted agent. (Section 194) 
• To renounce agency. (Section 201)
• To claim compensation for pre-mature revocation of authority. (Section 205) 
• To retain sums received for principal. (Sections 217 and 218)
• To claim remuneration. (Section 219)
• Lien – to detain sale proceeds. (Section 221)
• To claim indemnification. (Sections 222 – 224)

Right to retain sums (Sections 217 and 218)

Although the agent has a duty to pay to his principal all sums received on the principal’s account, he has also a right to retain, out of any sums received on account of the principal in the business of the agency, all money due to himself in respect of advances made or expenses properly incurred by him in conducting such business and also such remuneration as may be payable to him for acting as an agent. Similarly, when an agent sells his principal’s goods, he may detain money received, for his remuneration on account of the goods sold by him. 

Right to claim remuneration (Section 219)

According to Section 219, an agent’s remuneration does not become due to him until the completion of the acts assigned to him. This rule is subject to any special contract between the principal and the agent. In Saraswati Devi vs. Motilal, it was held that the agent becomes entitled to a commission because he found the person who was willing to buy the estate even though the defendants refused to sell it. 

Right to lien (Section 221)

An agent is entitled to retain goods, papers, and other property, 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 to him. A purchasing agent can exercise a lien over the goods purchased for his principal until the amount due to him for such purchases has been paid. Such right is, however, subject to an agreement to the contrary. The right to lien is not there when the agent parts with the possession of the goods. 

Right to be indemnified (Section 222 – 224)

An agent has a right to indemnification against the consequences of all lawful acts done by him in good faith in the course of business. He is also entitled to indemnity against the consequences of an act done in good faith, even though the act causes an injury to the rights of the third persons, for example, it is tort. 

In Adamson vs. Jarvis, the plaintiff, an auctioneer, sold certain goods in good faith on behalf of the defendant, unaware of the fact that the defendant had no good title and no right to sell the goods. 

The plaintiff, the auctioneer was made to compensate the true owner, therefore, the plaintiff was entitled to be indemnified by the defendant for loss caused to the former.

Section 224, makes it clear that if the agent commits a crime at the instance of principal, the agent cannot claim indemnity from the principal against the consequences of crime.

Therefore, the right of indemnification is available only in civil wrongs committed in good faith and not against criminal wrongs. 

Duties of an agent 

• According to Latin Maxim, ‘Delegatus non potest delegare’, it is the duty of the agent not to delegate his authority until and unless it is necessary according to the custom of trade, business or when the act does not require personal skill or the principal expressly or impliedly agrees to the appointment of sub-agent.
• According to Section 195, the agent has a duty to use his discretion for appointment of a substituted agent for the principal. 
• To conduct business as per directions/ business custom/ with skill/ reasonable diligence. (Sections 211 and 214) – It is the duty of the agent to conduct business with proper direction, customs, skill and reasonable diligence. In Keppel vs. Wheeler, the principal instructed an estate agent to find a buyer for his estate. The agent communicated an offer of a prospective purchaser who was willing to buy the estate for 6,150 dollars. Before the contract for sale was concluded, the agent got an offer of 6750 from another buyer. The agent did not communicate the second offer to the principal. It was held that the agent did not show proper skill and care in the matter and, therefore, he was liable to pay damages to his principal for the loss suffered by him. 
• Under Section 213, an agent is bound to render proper accounts to his principal on demand. In order to fulfil his duty, the agent needs to maintain proper accounts of the sums belonging to the principal. He should misappropriate or miss utilise it.  Usually, this Section provides the agent’s duty to provide accounts to his principal, but there is no provision in the act enabling the agent to render an account from the principal or fill a suit for this purpose. But in Narandas vs. Papammal, the Supreme Court stated that the agent has a right to sue his principal to render accounts as an equitable right under special circumstances. Such circumstances may be: 
  • Where such accounts are in possession of the principal and the agent does not possess an account to enable him to determine his claim against the principal.   
  • Where his remuneration depends on the extent of dealings which are known to him but its accounts are only with the principal. 
• According to Section 214, it is the duty of the agent, in case of difficulty, to use all reasonable diligence in communicating with the principal and obtain his instructions. Even if after using reasonable diligence communication is not possible then the agent should act in accordance with the rules mentioned in Section 189.
• According to Section 215 and 216, it is the duty of the principal not to deal on his account without the consent of the Principal. Further he has a duty of not to conceal and disclose all material facts to the principal.  
• Duty to pay sums received for principal (Section 217 and 218) – it is the duty of the agent to pay all the sums received by him on the principal’s account. 

Liabilities of the agent 

1. Agent is liable for the acts or misconduct of his sub-agent. (Sections 192 and 193)
2. As mentioned above, it is the duty of the agent to maintain the principal’s account. He is liable in case of any misappropriation or loss due to acting contrary to directions. (Section 211)
3. For loss due to neglect/want of skill/misconduct. (Section 212)
4. Liability for fraud. (Section 238)
5. Generally, an agent acts on behalf of the principal in his dealings with a third person, a contractual relationship between the principal and the third person is created and the agent is not personally liable. In National Textile Corporation ltd vs. Naresh Kumar Badri Kumar Jagad, the Supreme Court stated, “An agent is merely an extended hand of the principal and cannot claim independent rights.”  According to Section 230, this rule is subject to contrary and the agent is personally liable in the following cases:

• Where the contract is made by an agent for the sale or purchase of goods for merchant residents abroad.
• Where the agent does not disclose the name of his principal.
• Where the principal, though disclosed, cannot be sued.
• When there is a contract for the agent’s personal liability.
• When the agent makes a breach of some legal obligation.
• When he untruly represents that he has an authority to act on behalf of the principal.

Rights of the principal 

• When an agent acts on behalf of the principal without his authority or knowledge, according to Section 196 of the Indian Contract Act, the principal has the right either to disown the act or to ratify the same.
• The principal under Section 201, has the right to revoke the agent’s authority by giving a notice of revocation.
• An agent under Section 211 is bound to conduct the business of his principal according to the directions given by the principal. In absence of any such direction the agent should conduct the business to the prevailing customs. When the agent does not act as stated in this section, the principal has a right to claim or any loss and in case profit accrues, he must account for it.
• According to Sections 215 and 216, when an agent deals on his own account without principal’s prior consent, the principal has the following rights: 

To repudiate the transaction by showing either:

1. That any material fact has been dishonestly concealed from him by the agent; or
2. That the dealings of the agent have been disadvantageous to him. 

To claim secrets benefits made by the agent from such a transaction.

• For contracts entered into by the agent on behalf of the principal for which the principal has authorized the former, the principal has the right to enforce the contract against the third party. (Section 226)
• A principal is bound only for such acts of the agent which are within the authority of the agent. If the agent’s act is in excess of the authority, the principal is not liable for the same. Sometimes a part of the act done by the agent may be within the authority and the other part outside it. If the two parts can be separated, then the principal is bound by such part only as is within the authority, and he is not liable for the part of the act which is outside his authority. If the two parts cannot be separated, then the principal is not bound to recognize the transaction. (Sections 227 and 228).  In Ahammed vs. Mamad Kunhi, an agent was authorized to sell half of the rights of a certain property. He, however, entered into an agreement with the purchaser-plaintiff to sell the entire property. As the authorized and unauthorized portion were separable. It was held that specific performance of that half portion of the property could be claimed by the purchaser under Specific Relief act, in respect of which the authority for sale was given to the agent.

Duties and liabilities of the principal 

• It is the duty of the principal under Section 217 to pay remuneration to the agent, his pays, advances and expenses incurred during the course of business. In case of failure to do so, the principal will be liable.
• It is the duty of the principal under Section 222 and 223 to indemnify the agent against the third party for all the authorized lawful acts done by him in the course of business on behalf of the principal. In case of failure to do so, the principal will be liable.
• When an agent commits a tort in the course of business on behalf of the principal, both principal and agent are deemed to be tortfeasors.  In spite of this rule of indemnification Section 224, clearly states a principal shall not be liable to indemnification for the criminal acts committed by his agent.
• According to Section 225, it is the duty of the principal to compensate the agent for injury to the agent by the principal’s neglect or want of skill. In case of failure to do so, the principal will be held liable.
• According to section 226-227, if an agent does an unauthorized act the principal is not liable for the act of the agent but if an agent acts in excess of authority the principal is held to be liable.  
• According to Section 237, sometimes, the agent is neither vested by the express or implied authority by the principal to act on his behalf, but the principal through his acts and conduct creates an impression in the mind of the third party that the agent has the authority to act on his behalf. In such a case, the principal is liable towards the third person for the acts done by the agent, on the ground of the application of the law of estoppel. The basis of the action is what appears to the third person to be an authority, i.e., apparent or ostensible authority conferred on the agent. In case of failure to do so, the principal will be held liable.
• When an agent or sub-agent, acting in the course of the principal’s business, makes misrepresentation or commits a fraud, it has the same effects on agreements made by such agents as if such misrepresentations or frauds had been made, or committed by the principals, hence the principal is held liable. It is based on the Latin maxim, ‘Qui facit per alium facit per se’, which means that the act of an agent is the act of the principal. But misrepresentations made or frauds committed by agents, in matters which do not fall within their authority, the principal is not liable. 
• According to Section 229, any notice or information which was given to an authorized agent was deemed to be given to the principal, and hence the principal was liable to the third party with regard to such notices or information. 

Rights of the third person 

• According to Section 226, the third person has a right to enforce the contract which is entered by an agent on behalf of this principal.
• The third person has a right to enforce a contract against the agent or principal, as per Section 231.
• According to Section 232, an agent is entitled to equities against undisclosed principals.
• The third person as per Section 200, has a right of being prejudiced by ratification of unauthorized acts.
• The third person according to Sections 233 and 234 has a right to sue either the agent or the principal or both of them in any breach of contract.
• The third person has a right to estoppel against the principal (Section 237) : Sometimes, the agent is neither vested by express or implied authority by the principal to act on his behalf, but the principal through his acts and conduct creates an impression in the mind of the third party that the agent has the authority to act on his behalf. In such a case, the principal is liable towards the third person for the acts done by the agent, on the ground of the application of the law of estoppel. The basis of the action is what appears to the third person to be an authority, i.e., apparent or ostensible authority conferred on the agent. 
• According to Section 235, the third person has a right to claim compensation from an agent, when he untruthfully represents that he has authority and is acting on behalf of the principal has induced the third person, but the principal disowns the act, i.e., does not ratifies the same. 
• According to Section 200, the third person has a right of not to be prejudiced by the ratification of unauthorized act of the agent.

Duty and liability

• After entering into an agreement either with the authorized agent or the principal the third party has a duty to perform the contract. 

Termination of agency 

Section 201 of the Indian Contract Act, 1872 provides diverse modes of termination of agency:

1. By the principal revoking the authority of the agent by giving him a notice.
2. By renunciation of the business of agency by the agent.
3. By the completion of the business of the agency. (For e.g., completion of transaction; expiration of the period for which agency may have been given)
4. By death, insolvency or insanity of either the principal or agent; dissolution of an incorporated company.

Besides the above modes, it may be terminated in the following cases:

1. By the destruction of the subject matter of the agency. (Section 56)
2. By happening of an event which renders agency or its objects unlawful. (Section 56)
3. By frustration of the agency or its object such as disability, misadventure, literal impossibility.

Section 202 to 210 provides various rules for termination of agency:

• According to Section 202, when the authority of the agent is “coupled with interest”, the authority conferred on the agent cannot be revoked to the prejudice of the agent’s interest. Even if the contract is described as irrevocable it can still be revoked, if no interest has been created in favour of the agent. The court in Smart vs. Sandars, while explaining the phrase “coupled with interest”, stated: “that where an agreement is entered into on a sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the done of the authority, such an authority is irrevocable.”
• Further, Section 203 provides the principal can evoke the authority conferred by him on his agent any time before the authority has been exercised so as to bind the principal.  In Pankaj Kumar A. Patel vs. Life Insurance Corporation of India, the court stated: “However, before the agency is terminated on ground of commission of fraud by concealing facts resulting in loss of faith in the agent, the agent must be afforded an opportunity of hearing”. 
• According to Section 204, when the authority has been partly exercised by the agent, there can be no revocation of agency as regards such acts and obligations as arise from the acts already done. ILLUSTRATION: A authorizes B to buy 100kg of rice on account of A and to pay for it out of A’s money remaining in B’s hands. B buys 1,000 bales of rice in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authority so far as regards payment for the cotton.
• Section 205 states when the agency has been created for a fixed time by an express or implied contract, its premature revocation by the principal will make him liable towards the agent, unless the revocation has been made with any sufficient cause.
• According to Section 206, the principal should give reasonable notice of revocation to the agent for termination of the agency, otherwise, he can be made liable to make good any damage that may be caused to the agent.
• According to Section 207, revocation of agency may be either expressed or implied in the conduct of the principal. For example, A empowers B to let A’s car hit himself. This is an implied revocation of B’s authority. 
• According to Section 208, termination of agency does not become effective immediately. It takes effect: 

1. Against the agent, when the fact of termination becomes known to him.
2. Against third persons, when it becomes known to them. 

Illustration: A directs B to sell his 5 plots for him and agrees to give 10% commission on it.  A, afterwards changes his mind and by a letter, revokes B’s authority, but before B receives the letter, he sold a plot for 1000 rupees. The sale is binding on A, and B is entitled to 100 rupees as his commission.

• According to Section 209, the agency is terminated on the death of the principal or if he becomes mentally insane. 
• According to Section 210, the termination of authority of an agent causes the termination of the authority of all sub-agents appointed to him.

As the principal can revoke the agent’s authority, so also the agent can renounce the by giving the principal reasonable notice of renunciation otherwise he will be liable to make good any damage caused to the principal for want of such notice. Further, this revocation can be either expressed or may be implied in the conduct of the agent. When there is a contract of agency for a fixed period of time and the agent makes renunciation, without any sufficient cause, prior to the expiry of the stipulated time, he must compensate the principal for any loss caused to him by the premature renunciation. 

Conclusion

In modern times with the growth of the business organization, the contracting agency plays an important role in the devolution of authority by the principal to the agent. Chapter X of the Indian Contract Act illustrates in detail the various intricacies of the contract of agency, the rights, duties and liabilities of the third party, the principal and the agent. It also explains that the use of the agency is not essential, it could also be inferred from the implied conduct of the parties. Further, this contract also provides an account of the diverse ways for revocation of the contract of agency by the principal and the agent.

References 

• Inidiankanoon.com
• Casemine.com
• Mulla The Indian Contract Act by Sir Dinshaw Fardunji Mulla, 15th edition
• Contract II by Dr.R.K.Bangia, 17th Edition, 2017, Allahabad Law Agency

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