Duties of Agent towards Principal
Introduction
The relationship between an agent and a principal is based on trust and confidence. The Indian Contract Act, 1872 lays down clear duties that an agent must follow while acting on behalf of the principal. These duties ensure honesty, accountability, and proper conduct in business transactions.
Meaning / Definition
An agent is a person who acts on behalf of another (principal) and creates legal relations with third parties. While doing so, the agent must follow certain legal duties to protect the interests of the principal.
Modes or Types
Duty to follow instructions (Sec. 211)
The agent must act according to the directions given by the principal.
If no directions are given, the agent must follow the usual customs (accepted practices) of that type of business.
Duty to act with reasonable care, skill and diligence (Sec. 212)
The agent must perform work with proper care and skill expected from a person in that position.
If the agent is careless or unskilled, he must compensate (pay for loss) caused to the principal.
Duty to render accounts (Sec. 213)
The agent must maintain proper and correct accounts of all transactions.
He must show these accounts to the principal whenever demanded.
Duty to communicate in difficulty (Sec. 214)
If any problem arises, the agent must try to contact the principal and seek instructions before acting.
Duty not to deal on own account (Secs. 215–216)
The agent must not act for his own benefit in the same transaction without the principal’s consent.
If he does so, the principal can cancel (repudiate) the contract or claim any benefit made by the agent.
Duty to pay sums received (Secs. 217–218)
The agent must pay all money received on behalf of the principal.
He cannot keep or misuse such money.
Duty not to make secret profit
The agent must not earn any hidden profit from the agency.
Any such profit must be disclosed and given to the principal.
Duty to act in good faith
The agent must act honestly and for the benefit of the principal.
He should not act in a way that harms the principal.
Duty to protect principal’s interest (Sec. 219)
The agent must act in a way that protects the principal’s interest, especially in difficult situations.
Duty not to delegate authority (Sec. 190)
The agent must perform duties personally and cannot pass them to another person unless allowed by the principal.
Duty to maintain confidentiality
The agent must not disclose confidential (private) information of the principal.
Duty not to exceed authority
The agent must act within the limits of authority given by the principal.
If he exceeds authority, he may become personally liable.
Practical Example
Kala asks her agent Saima to buy a house. Saima does not buy it for Kala but secretly buys it for herself.
In this case, Kala can claim the house at the same price because Saima violated her duty.
Summary
- Agent must follow instructions or business customs
- Must act with reasonable care, skill, and honesty
- Must maintain and present proper accounts
- Must not make secret profit or act for personal gain
- Must communicate with principal in difficult situations
- Must not exceed authority or delegate without permission
- Must protect principal’s interest and maintain confidentiality
- Must hand over all money received on behalf of principal