1. Duty to Execute the Mandates of his Principal (S. 211): An agent is bound to conduct the business of his principal according to the directions given by the principal. He has to act as he would have acted had he been the principal. But if principal is ambiguous in his words, then later on cannot impose his interpretation. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal and if any profit accrues, he must account for it.

> Pannalal Jankidas v Mohanlal: Agent did not insure goods (as against directed by principal)- goods destroyed in explosion at Bombay Harbor. Agent esponsible- must compensate principal- had to pay 50%.

>  Lilly v Doubleday: Agent was instructed to store goods in warehouse X. He stored some in X and some in warehouse Y. Due to leakage, goods in Y got damaged. The agent had stored some goods in warehouse Y as it was cheaper and he did so in the best interest of the principal, but this was done in contravention to the instructions given. So, he had to make good the losses.

2. Duty to Follow the Custom (S. 211): In the absence of any directions by the principal, the agent should act according to the customs which prevail in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal and if any profit accrues, he must account for it

3. Duty to Maintain the Business Secrets of the Principal:

4. Duty of Reasonable Care, Skill, and Diligence (S. 212):

  • An agent is bound to conduct the business of the agency with as much skill as is generally possessed by person engaged in similar business, unless the principal has notice of his want of skill.
  • The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill, or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill, or misconduct.

>  Keppel v Wheeler : estate agent instructed to find buyer- found one, subsequently found another who gave better offer- concluded sale with former- HELD- agent did not show proper skill and care- liable for loss suffered by principal

>  Pannalal Jankidas v Mohanlal : illustration for ‘direct consequences’- agent failed to insure goods (as against principal’s instructions)- goods destroyed in explosion- loss direct result of agent’s negligence

5. Duty to Render Accounts (S. 213): An agent is bound to render proper accounts to his principal on demand. To communicate profit/loss/income gained/income lost. Cannot keep the principal in darkness.

  • Narandas Morardas Gajiwala v SPAM Papammal : agent can sue for accounts too when all accounts are under principal

6. Agent’s Duty to Communicate with Principal (S. 214): It is the duty of an agent in case of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions. He’ll have to make good the losses caused due to non-communication.

7. Duty to Avoid Conflict of Interest: Duty not to deal on his own account in the business of the agency (Ss 215-216):

  • Duty not to deal on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject (S. 215)
  • Consequences:

(1) The principal may repudiate the transaction, if the case shows, either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.

 (2) The principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction (S. 216).

>  De Busche v Alt: Japanese agent appointed to sell a ship. Ship couldn’t be sold. Agent became the buyer but didn’t inform principal. Agent bought it for 90k. War broke out; govt. bought the ship for 160k. Plaintiff sued to recover profits from the sale- LIABLE- did not disclose the fact that he is buying the ship (even though contention that he was honest may be accepted)

>  Bentley v Craven: agent sells to principal- bound to account for any profit from the transaction- immaterial whether sold at market price

8. Duty Not to Make Secret Profits (S. 216): Not to make any secret profits. Not keep the principal in darkness.

9. Duty to Remit Sums (S. 218): to give the net remittances to the principal from whatever has been given/paid by the third party.

10. Duty to Safeguard the Interest on Principal’s Death or Insanity (S. 209): act in the best interest of the principal following his death or insanity. Only in the case of an existing agency/when agency is already in function.

11. Duty Not to Act Beyond the Scope of Authority (S. 228)

12. Duty Not to Delegate (S. 190):

    • Based on the doctrine of Delegatus Non Potest Delegare (S. 190)
    • The General Rule: An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a subagent may, or, from the nature of the agency, a sub-agent must, be employed.
    • Exceptions: 1.Nature of work, 2.Trade Custom, 3.Ministerial Action 4.Principal’s Consent.


Disclaimer: – The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

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Qualification: CS
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Location: Shubham Phophalia, Gujarat, India
Member Since: 08 May 2021 | Total Posts: 57
I am Shubham from Batch 2016-21 of GNLU. I am in my final year of 5 years integrated BA LLB course from GNLU, Gandhinagar, and I have completed Company Secretary Course meanwhile with 3rd Rank in Ahmedabad, Gujarat in CS Professional. I am a keen reader and enthusiastic listener of Corporate laws an View Full Profile

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October 2021