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Important Cases On Agency

The document discusses four important cases related to agency law. The first case establishes the distinction between a servant and an agent. The second case discusses apparent authority. The third case discusses principal's vicarious liability. The fourth case discusses an agent's duty to disclose information to principals.

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Bipasha Handa
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80 views5 pages

Important Cases On Agency

The document discusses four important cases related to agency law. The first case establishes the distinction between a servant and an agent. The second case discusses apparent authority. The third case discusses principal's vicarious liability. The fourth case discusses an agent's duty to disclose information to principals.

Uploaded by

Bipasha Handa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Important Cases on Agency

1. Lakshminarayan Ram Gopal v. Gov’t of Hyderabad, AIR 1954 SC

364

Held (Distinction between Master & Servant and Principal & Agent):

• It is specifically held that an agent is not a servant, but a servant is generally


for some purposes his master's implied agent, the extent of the agency
depending upon the duties or position of the servant.
• A servant acts under the direct control and supervision of his master and is
bound to conform to all reasonable orders given to him in the course of his
work.
• Principal & Agent: A principal has the right to direct what work the agent has
to do, however an agent is entirely independent of any control or interference.
An agent, though bound to exercise his authority in accordance with all lawful
instructions which may be given to him from time to time by his principal, is not
subject in its exercise to the direct control or supervision of the principal.
• Distinction between a servant and an agent:
1. Generally, a master can tell his servant what to do and how to do it.
2. Generally, a principal cannot tell his agent how to carry out his instructions.
3. A servant is under more complete control than an agent.
4. Generally, a servant is a person who not only receives instructions from his
master but is subject to his master's right to control the manner in which
he carries out those instructions. An agent receives his principal's
instructions but is generally free to carry out those instructions according
to his own discretion.
5. Generally, a servant has no authority to make contracts on behalf of his
master. Generally, the purpose of employing an agent is to authorize him to
make contracts on behalf of the principal.

.
6. Generally, an agent is paid by commission upon effecting the result which
he has been instructed by his principal to achieve. Generally, a servant is
paid by wages or salary.

• Distinction between a principal and an independent contractor:


- Principal: A principal has a right to direct work to his subordinates.
- Independent contractor: An independent contractor works under his own
discretion and has no interference from the principal.

2. Harshad Shah v. LIC, (1997) 5 SCC 64

Parties involved:
a. Insured
b. LIC of India
c. Widow (Wife of the insured)
d. General Agent of LIC

Facts:
• March 6, 1986: The insured registered for four policies of INR 25, 000 each.
• June 4, 1987: The insured paid the money due as premium, to a general agent
of LIC by a bearer cheque.
• June 6, 1987: The son of the general agent encashes the cheque.
• August 9, 1987: The insured dies.
• August 10, 1987: The general agent deposits the premium with the LIC of
India.
• The widow claims money from LIC, stating that her husband has unfortunately
died and now there is a need for money.
• LIC rejects her claim, saying that the money was NOT deposited during the
lifetime of the insured.
• Widow claims that the money was given to a general agent of LIC and thus is
deemed to have been given to the LIC of India.

.
• The LIC of India objects to the widow’s claim by stating that the general
agents are NOT empowered to collect money from the insured under any
circumstances, and thus, this cannot be accepted as a valid contention.

Issue: Whether the premium given to the general agent of LIC, amounted to giving
the money to LIC itself?

Held (apparent authority):


• The court held that the premium given to the general agent of LIC does NOT
amount to paying LIC.
• No such case set up by the appellants in the lower courts that LIC, by its
conduct had induced policyholders to believe that the general agent were
authorised to receive premium on behalf of LIC (Section 237 not applicable).
• The mere fact that LIC allowed the agent to deposit money on behalf of the
insured is not enough to prove that LIC induced the insured to believe that the
agent had authority to collect premiums from the insured (Section 237 not
applicable).

3. State Bank Of India V. Shyama Devi, AIR 1978 SC 1263

Held (Principal’s vicarious liability for the agent’s actions): The legal principle
which governs the vicarious liability of an employer for the loss caused to a
customer through the misdemeanour or negligence of an employee are:

a) The employer is not liable for the act of the servant if the cause of the loss
or damage arose without his actual fault or privity or without the fault or
neglect of his agents or servants in the course of their employment;
b) The damage complained of must be shown to have been caused by any wrongful
act of his servant or agent done within the scope or course of the servant
or agent's employment even if the wrongful Act amounted to a crime;
c) A master is liable for his servants fraud perpetrated in the course of
master's business whether the fraud was for the master's benefit or not, if it
was committed by the servant in the course of his employment. There is no

.
difference in the liability of the master for wrongs whether for fraud or any
other wrong committed by a servant in the course of his employment and it is
a question of fact in each case whether it was committed in the course of
the employment.

4. Kelly v. Cooper, [1993] AC 205

Parties involved:

a. Plaintiff
b. Plaintiff’s Neighbour
c. Defendant (a firm of estate agents)
d. Purchaser of Property

Facts:
• Plaintiff asked the defendant to sell his house and promised the defendant a
commission for the same. Plaintiff was seeking USD 3.5 Million for his house.
• Plaintiff’s neighbour also asked the defendant to sell his house (Plaintiff’s
neighbour’s house).
• The defendant received two offers from the same purchaser, one for the
plaintiff’s house, for USD 2.5 Million and for the plaintiff’s neighbour’s house
for USD 2 Million.
• Both agreed to the offers and accordingly accepted. The sale was made.
• Now, the plaintiff sues the defendant for not disclosing the fact that the
plaintiff’s neighbour sought to sell his own house. It could affect the price of
his house and is thus considered a material fact.

Issue: Whether the estate agent is liable to disclose information to his principal,
which pertains to his dealings with another principal?

Held: The court held that the agent is NOT bound to disclose information that he
received from one principal to another principal.

.
• In the case of estate agents, it is their business to act for numerous principals.
Despite this conflict of interest, estate agents must be free to act for several
competing principals, otherwise they will be unable to perform their function.
• It is the business of estate agents to act for numerous principals, several of
whom might be competing and whose interests would conflict. Therefore, a
term was to be implied in the contract with such an agent that he was
entitled to act for other principal’s selling similar properties and to keep
confidential information obtained from each principal.
• Although the purchaser’s interest in acquiring both properties was material
information which could have affected negotiations for the sale price of the
plaintiff’s house, the defendants were not in breach of their duty in failing to
inform the plaintiff of the agreement to buy the adjacent house, which was
confidential to the owner thereof.

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