Joint and Several Liabilities on the Contract of Agency

Bahria University Islamabad

Contents

1. Introduction: .......................................................................................................................... 2
1.1. Agency:.................................................................................................................................... 2
3. Establishment of agency: .......................................................................................................... 3
3.1. Explicit choice of the principal: ............................................................................................ 3
3.2. Implicit choice of the principal: ............................................................................................ 4
EXAMPLE: ................................................................................................................................... 4
3.3. Agency by law: ....................................................................................................................... 4
3.4. Through necessity: ................................................................................................................. 5
For example: .................................................................................................................................. 5
3.5. By estoppel:............................................................................................................................. 6

1
3.6. Ratification: ............................................................................................................................ 6
3.7.Dissolution: .............................................................................................................................. 6
3.7.1. Through parties: ................................................................................................................. 7
3.7.2 Through Law:....................................................................................................................... 7
4. Vicarious Liability: ................................................................................................................... 8
5. Respondent Superior: ............................................................................................................... 8
6. Where principal is liable and not liable? ................................................................................ 8
7. Cases: ....................................................................................................................................... 10
7.1. Kedar Nath v L Manak Chand ........................................................................................... 10
7.2. Chairman L.I.C v. Rajiv Kumar Bhaskar ......................................................................... 10
8. Conclusion: .............................................................................................................................. 11
Bibliography: ............................................................................................................................... 11

1. Introduction:

1.1. Agency:

Section 182 of Contract tells us about “agency”, “agent” and “principal”.1

“Agent” and “principal” are two parties where agent works on behalf of its principal and make

contract with other party.2 Agent work is to establish relationship between principal and third

1
‘Law of Agency, Scribd.com https://www.scribd.com/doc/20874146/Agency-Indian-Contract-Act-1872(November
2, 2017).

2
‘Principal Agent Relationship, Investopedia.com https://www.investopedia.com/terms/p/principal-agent-
relationship.asp(November 2, 2017).

2
party through contracts .In other words agent is a representative which works under principal and

do acts for principal.3

The relationship between principal and agent is called agency or agency is make when both

principal and agent mutually create an agreement where principal empower agent and then agent

performs task on behalf of principal in contract making.4

Several and joint liability means that a third party can sue principal and agent both or anyone and

get awarded for the loss he bears through courts.5

2. How agency is construct:

Agency is construct in written form or orally and oral contract is legal.

3. Establishment of agency:

3.1. Explicit choice of the principal:

Agency can be construct through expressed form, where principal in written way or by his

words (through mouth) appoints an agent and give him powers to make contracts with third

3
‘Principal Authorize Power to Agent’
Uk.practicallaw.thomsonreuters.comhttps://uk.practicallaw.thomsonreuters.com/1-107-
6376?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1( November 4, 2017).

4
‘Agency: Contract Act 1872’ Indian Rules’Lawctopus.com https://www.lawctopus.com/academike/agency-
contracts/(November 5, 2017).

5
Joint and Several Liabilities of Agent and Principal’ Legalamicus.com http://legalamicus.com/joint-and-several-
liability-of-the-principal-and-the-agent/(November 4, 2017).

3
party.6 The agent is bound to use his powers in limits, if he surpass the powers then he will be

responsible for his acts alone to the third party and principal would not liable for his acts.

3.2. Implicit choice of the principal:

In implied contracts if a person through his gestures and acts shows that he has powers to do

such particular act and principal admits that he was allowed to act consequently, then the law can

surmise the formation of agency.7

EXAMPLE:

If A” allows “B” to order goods for him and B orders on his behalf and then pay for them,

agency is implicit there and “A” is bind to pay “B” because he expressly approves them.

3.3. Agency by law:

In occasions the agency can be formulated through law. Law can honors an agent as having

powers in situations where

 Third party believes that a person is agent because principal make it believe them

that agent has powers to make contracts for principal through his speaking and

gestures.8

6
“Expressed Appointment by The Principal’ Worksmart.org.uk https://worksmart.org.uk/work-rights/pay-and-
contracts/contract-terminology/what-difference-between-implied-and-express-terms(November 4, 2017).

7
‘What is Implied Agency? Definition, Summary and History’ Shsu.com
https://www.shsu.edu/klett/agency%20et%20al.htm(November 8, 2017).

8
‘What is Agency by Operating Law? Definition, Summary’ Lawteacher.Com
https://www.lawteacher.net/free-law-essays/commercial-law/the-law-of-agency-commercial-law-
essay.php(November 10, 2017).

4
  Where agents has powers earlier but then principal dismiss such powers later but

he did not notify or tell agent about such dissolution.9

3.4. Through necessity:

Where there are circumstances where agent have no connection with his principal and some

emergency came out and agent act is essential for the protection of principal’s property, then court

consider the agent as having essential powers to perform certain act for the safety of its principal’s

property. When necessity agency is formulated then agent is entitled to receive expenses from

principal which he suffered during the protection of principal’s property but there are few

conditions. The agency of necessity can be formulated only when agent does something which is

essential or required for the sake of protection of principal’s property, the agent was not in a contact

with principal due to some technical issues or due to any other issues and agent perform the act

with good intentions.10

For example:

“A” sent his goats to “B” by Railway Company but B did not come to receive the goats from

Railway Company. It was essential or necessary for the railway company to feed the goats for the

survival of goats. Here the agency of necessity is formulate and Railway Company acts as an agent

of necessity and he can ask for his expenses which he suffered on feeding the goats.

9
‘Principal Must Notify the Agent about Termination’ Law of Operation, Coursehero.com
https://www.coursehero.com/file/p7ji70o/An-agency-contract-is-terminated-by-operation-of-law-in-the-
following/(November 8, 2017).

10
‘Agency by Necessity’ Eaa.org.hk https://www.eaa.org.hk/en-us/Information-Centre/Publications/Agency-Law/-
3-Formation-of-agency(November 8, 2017).

5
 3.5. By estoppel:

A person can only by an agreement where he gives power to another person or appoints an agent

to perform tasks for him and make contracts with the third party for him. A person is not bind

where he does not allow another person or give power to him but if a person through his gestures

and acts makes third party believe that another person is his agent and he is doing work on his

behalf when in actual he is not his agent, in this case a principal will be prohibited from repudiating

that person’s power to perform for him.11

3.6. Ratification:

Agency through ratification can be formulate when

 When an agent who was appointed by principal to work on his behalf surpasses his powers

 Or when a person who has no power to act upon but he acted as if he has power 12

In these two case it is up to principal whether he approves the contract or he discards it.

If the principal approves the contract then this approval will be called as ratification. Ratification

can be implicit or explicit.13

3.7.Dissolution:

Section 154-163 deals with the termination of powers of an agent.

11
What is Estoppel’ Doctrine of Estoppel, Legalservicesindia.com
http://www.legalservicesindia.com/article/article/agency-by-estoppel-88-1.html(November 11, 2017).

12
‘Agency by Ratification’ Creation of Agency, Legalservicesindia.com
http://www.legalservicesindia.com/article/article/contract-ratification-434-1.html(November 8, 2017).

13
‘Ratification’ Accountlearning.com https://accountlearning.com/agency-by-ratification-governing-rules-
effects/(November 12, 2017).

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3.7.1. Through parties:

 Parties can dissolute through mutual consensus.

 Withdrawal by principal.

 Denial by agent.

All these can be done by the lawful notice.14

 Through agency’s presentation15

 Through termination of the fixed time period.16

3.7.2 Through Law:

 According to the section 168 when principal died then agent must take sensible steps to

secure protect the concern assigned to him by the principal.17

 Through the consequent senselessness of both principal/ agent. An unsound person

cannot infer into the agreement as a principal or agent.

 Through the economic failure/indebtedness of principal.

 If the agency is dismissed, the principal is not bind by the businesses which agent entered

into with third parties. In this case agent is responsible alone.

14
‘Termination of Agency’Coursehero.com https://www.coursehero.com/file/p7ji70o/An-agency-contract-is-
terminated-by-operation-of-law-in-the-following/(November 8, 2017).

15
‘Termination’
Trianagents.comhttp://www.trainagents.com/DesktopModules/EngageCampus/CourseContent.aspx?ModuleType
=StudentMyCourses&CrsPageType=Topic&CourseRecordID=116&LessonRecordID=1438&TopicRecordID=26584&D
emo=True(November 8, 2017).

16
‘Termination of Fixed Time Period’ Agency.uslegal.com https://agency.uslegal.com/duration-and-termination-of-
agency/(November 15, 2017).

17
‘Termination by Law, How law can Terminate? Study.com’ http://study.com/academy/lesson/terminating-
agency-relationships.html(November 13, 2017).

7
4. Vicarious Liability:

Section 155 tells us about vicarious liability.

Agent is the person which is appoint by another person called principal. An agent is fully

responsible for the negligence in his acts because he is given powers by principal. Principal has

full control agent. This is the form of vicarious liability where one person is responsible to

another for the acts.

The employer is responsible for the acts of his employee because he has somehow give

employee the power to do acts and because of this power an employee can cause accidents

sometimes which makes employer equally responsible.

5. Respondent Superior:

It’s a doctrine which says that sometimes employer is equally responsible for the acts of

employee when he is under his services.

6. Where principal is liable and not liable?

 Principal is liable for everything which his agent do. Agent is appoint and empower by

principal therefore, principal is responsible and liable for every acts of agent.18

18
‘Principal is liable’ Liabilities of principal https://accountlearning.com/rights-liabilities-principal-agent-third-
parties/.

8
  If agency is terminate because of some reason or revocation notice then principal will not

liable for any acts of agent.19

 If agent do anything under employment then all the tortious acts of agent will bind

principal because he appointed him.20

 If the third party is aware of denial of agent’s power which is done by principal then there

will be no liability on principal for agent acts.21

 If the agent is employed then tort committed by agent will bind principal and he would

be held responsible for the acts even if he does not give powers to agents ,does not take

part ,does not approve or aware of the wrongdoing of agent.

 An agent would be liable for his acts and if agent do something during employment then

principal and agent both would be liable jointly.22

Only principal is liable when contracts are make, agent is not liable there but agent can be liable

separately if agent

 Surpass the powers

 Does not practice his powers which is given by principal

Or enter into the contract as himself personally, not as an agent.

19
‘Agent is Liable’ http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=4337&context=ilj.

20
‘Torts of an Agent’ Principal Liability http://thebusinessprofessor.com/knowledge-base/principal-liable-for-torts-
of-an-agent/.

21
‘Termination of authority’ Saylordotorg.github.io https://saylordotorg.github.io/text_business-law-and-the-
legal-environment-v1.0-a/s42-liability-of-principal-and-age.html(November 17, 2017).
22
‘Several and joint liability’Legalservicesindia.comhttp://www.legalservicesindia.com/article/article/joint-&-
several-liability-167-1.html(November 17, 2017).

9
7. Cases:

7.1. Kedar Nath v L Manak Chand

In this case there was a plaintiff who was an advocate by profession and he file a case against

two defendants Ganesh Dass and Sanwall Dass (proprietors) for the retrieval of 1,700 a

professional dues which was not paid to him by defendants Ganesh and Sanwall who involved

plaintiff as counsel. The case was started in 1949-1950 and in 1952 Ganesh Dass died. The

request to bring his representatives was made after limitation of time period. Sanwall also died

during the case. The question here arise whether just Sanwall or his representatives are

responsible and liable without involving Ganesh or both Sanwall and Ganesh are liable.

The court held that both Ganesh and Sanwall are liable jointly and severally.

7.2. Chairman L.I.C v. Rajiv Kumar Bhaskar

2003 ACJ 86

(Implied Agency)

In this case the employer was to remove the finest from salary of the employee for depositing

according to L.I.C salary saving policy. The procedures related to this purpose was the duty of

employer. When the apprehensive employee died the heirs came to know that the scheme is

losing because employer evasion in sum. In the receiving of the letter by the employer which

states he would perform as an agent of employees rather than agent of LIC.23

23
‘L.I.C, Rajiv Kumar Bhaskar (2003)’ Indiancaselaws.wordpress.com
https://indiancaselaws.wordpress.com/2012/01/15/chairman-l-i-c-v-rajiv-kumar-bhaskar/(November 8, 2017).

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Question here arise whether the employer can be treated as agent of LIC?

It was held that explicit agent is not mean to be the agent of LIC of India Agents. But can

consider an agent in ordinary mean. The word agent which is used is not definite to conclude the

nature of the relationship.

8. Conclusion:

An agent is appointed by principal and all the powers which agent utilize is given by its

principal, therefore principal is equally responsible for the acts of its agent whether he knows or

not knows, whether he acknowledge through implicit agreement or explicit agreement

There are many events where principal is liable severally and sometimes he is liable jointly with

its agent. Similarly there are some events where agent is held liable individually and not jointly

with its principal and sometime agent is held liable jointly with its principal.

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6376?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

https://www.lawctopus.com/academike/agency-contracts/.

http://legalamicus.com/joint-and-several-liability-of-the-principal-and-the-agent/.

https://worksmart.org.uk/work-rights/pay-and-contracts/contract-terminology/what-
difference-between-implied-and-express-terms.

11
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law-essay.php.

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12
.

13