Nature of relationship of master and servant, principal and agent, and between principal and principal - Indian Laws - General

legal relationship of master and servant, principal and agent, and between principal and principal In Halsbury s Law of England Vol. 22, p. 113, 192 and Vol. 1, at p. 193, Article 345 , which reads: The difference between the relations of master and servant and of principal and agent may be said to be this: a principal has the right to direct what work the agent has to do: but a master has the further right to direct how the work is to be done. xx xx xx An agent is to be distinguished on the one hand from a servant, and on the other from an independent contractor. A servant acts under the direct control and supervision of his master, and is bound to conform to all reasonable orders given him in the course of his work; an independent contractor, on the other hand, is entirely independent of any control or interference and merely undertakes to produce a specified result, employing his own means to produce that result. 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. An agent, as such 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. Section 182 of the Contract Act, defines the words agent and principal and reads as under: 182. Agent and principal defined. An agent is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the principal . ...............the following factors/aspects should be taken into consideration: (a) The essential characteristic of an agent is the legal power vested with the agent to alter his principal s legal relationship with a third party and the principal s co-relative liability to have his relations altered. F.E. Dowrick, The Relationship of Principal and Agent, 17 MLR 24, 37 (1954) (b) As the agent acts on behalf of the principal, one of the prime elements of the relationship is the exercise of a degree of control by the principal over the conduct of the activities of the agent. This degree of control is less than the control exercised by the master on the servant, and is different from the rights and obligations in case of principal to principal and independent contractor relationship. (c) The task entrusted by the principal to the agent should result in a fiduciary relationship. The fiduciary relationship is the manifestation of consent by one person to another to act on his or her behalf and subject to his or her control, and the reciprocal consent by the other to do so. RESTATEMENT (THIRD) OF AGENCY (AMERICAN LAW INSTITUTE PUBLISHERS 2007) (d) As the business done by the agent is on the principal s account, the agent is liable to render accounts thereof to the principal. An agent is entitled to remuneration from the principal for the work he performs for the principal. [BHARTI CELLULAR LIMITED (NOW BHARTI AIRTEL LIMITED) - 2024 (3) TMI 41 - SUPREME COURT] In Bhopal Sugar Industries Limited v. Sales Tax Officer, Bhopal- 1977 (4) TMI 151 - SUPREME COURT, has expounded the difference between principal-agent and principal-principal relationship, in the following words:- 5. the essence of the matter is that in a contract of sale, title to the property passes on to the buyer on delivery of the goods for a price paid or promised. Once this happens the buyer becomes the owner of the property and the seller has no vestige of title left in the property. The concept of a sale has, however, undergone a revolutionary change, having regard to the complexities of the modern times and the expanding needs of the society, which has made a departure from the doctrine of laissez faire by including a transaction within the fold of a sale even though the seller may by virtue of an agreement impose a number of restrictions on the buyer, e.g. fixation of price, submission of accounts, selling in a particular area or territory and so on. These restrictions per se would not convert a contract of sale into one of agency, because in spite of these restrictions the transaction would still be a sale and subject to all the incidents of a sale. A contract of agency, however, differs essentially from a contract of sale inasmuch as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal. This is yet another dominant factor which distinguishes an agent from a buyer pure and simple. In Halsbury 's Laws of England, Vol. 1, 4th Edn., in para 807 at p. 485, the following observations are made: 807. Rights of agent. The relation of principal and agent raises by implication a contract on the part of the principal to reimburse the agent in respect of all expenses, and to indemnify him against all liabilities, incurred in the reasonable performance of the agency, provided that such implication is not excluded by the express terms of the contract between them, and provided that such expenses and liabilities are in fact occasioned by his employment.