Question

With reference to provisions in the Contracts Act 1950 and case-law, discuss the following:

Duties of principal towards his agent.

Answer 1

Duties of Principal towards his Agent:

1. To pay the agent the commission or other remuneration as agreed unless the agency relationship is gratuitous

The commission should be paid upon the completion of all contractual duties of the agent. Based on the section 172 of the Contract act, if the payment for the performance of any act due to agent until the completion of the act.

2. Not to willfully prevent or hinder the agent from earning his commission

The principal must not refuse to pay the commission or any bonus earned by the agent by his act. The Principal cannot hire another agent to compete with the first agent. However, it is agreed that the Principal himself may sell the property and on the completion of the sale, he is not bound to pay commission to his agent.

3. To indemnify the agent for acts done in the exercise of his authority

If there is fraud or the agent acts beyond his duty or he is negligent, he is entitled to be indemnified. Also where the Agent injury or any harm to the third party in execution of his duty while carrying out his duty in good faith, the Principal is required to indemnify the Agent against consequence of the act. Principal must reimburse the Agent of any legitimate expenses.

Illustrations: -

               B, at Kelang, under instructions from A, of Delhi, contracts with C to deliver certain goods to him. A does not send the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses.

4. To respect any lien the agent has over the property of the principal in the actual or constructive possession of the agent

In the absence of any contract to the contrary, an agent is entitled to retain goods, papers, and other property, whether 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 to him.