Rights of Principal

Introduction

In a contract of agency, the principal gives authority to the agent to act on his behalf. To protect the principal from misuse of this authority, the law provides certain rights. These rights allow the principal to control the agent and take action in case of misconduct or breach of duty.

Meaning / Definition

The rights of a principal are the legal powers available to him against the agent to ensure that the agent acts properly, honestly, and within the given authority.

Modes or Types

Right to repudiate the transaction

If the agent acts beyond authority or breaches his duty, the principal can reject (cancel) the transaction.

Right to claim benefit from agent

If the agent makes any profit by acting without the principal’s consent, the principal can claim that profit.

Right to recover damages

The principal can claim compensation (money for loss) from the agent if the agent’s actions cause loss.

Right to resist indemnity

The principal can refuse to compensate the agent if:

• The agent acted negligently (carelessly)
• The act was unlawful (illegal)
• The act was outside the agent’s authority

Right to avoid contract

If the agent violates his duties, the principal can cancel the contract entered into by the agent.

Right to impose constructive trust

If the agent wrongly keeps money or property belonging to the principal, the court can treat the agent as holding it for the principal and order return.

Right to sue agent for misconduct

If the principal is made liable to a third party due to the agent’s negligence, the principal can recover that amount from the agent.

Rights against acts beyond authority

• If authorised and unauthorised acts are separable → Principal is bound only by authorised acts
• If not separable → Principal can reject the entire transaction

Practical Example

A principal instructs an agent to buy goods at a fixed price. The agent buys at a higher price and secretly earns commission from the seller.
The principal can reject the transaction or claim the secret profit made by the agent.

Summary

• Principal can cancel transactions done beyond authority
• Can claim any secret profit made by agent
• Can recover damages for loss caused by agent
• Can refuse indemnity for illegal or negligent acts
• Can cancel contracts if agent breaches duty
• Can recover money or property wrongfully held by agent
• Can take action when agent exceeds authority