Restricted by time and money, a young business often finds it difficult to spread its wings beyond its immediate operating environment. It might be unviable to open a new office in another city which is showing promising signs for your business.
Appointing agents is a good option in such cases. The Indian Contract Act, 1872 defines an agent to be “a person employed to do any act for another, or to represent another in dealings with third persons.” You, whom the agent represents or will act, are termed as the ‘Principal’.
Benefits of Appointing an Agent
• Agents bring with them specialized local-market knowledge. It will, therefore, allow you to have better control of your product/service in a new market. • Agents can also help you with local rules/regulations
• They usually have an established network of traders and customer-data, which will come in handy for all your networking and marketing requirements.
What to Bear in Mind While Appointing Agents
Enter the terms and conditions of the agency in an agreement. Specify therein
• The specifications of goods/ services that the agent has been entrusted with
• The exact duties and responsibilities (also called the scope of work) of the agent for the term of agency
• The territorial limits for which the agent will be responsible
• The payment and remittances terms of the agency.
• The agent’s authority in times of emergency
• The exact calculation of the remuneration that the agent will be entitled to and the time within which he will receive such remuneration
• Termination conditions and liabilities thereof.
When can you Terminate an Agency
You may terminate the agreement with the agent in any of the following circumstance –
• Once the business that had been designated/agree upon is complete
• If the agent you appointed renounces the business of agency
• If you want to revoke the agreement
• If the agent dies or is declared to be of unsound mind
• If your business goes insolvent
What the Law Says
The Indian Contract Act, 1872 says –
• Any person who is of the age of majority and is of sound mind may employ an agent.
• An agent cannot be a minor or of unsound mind
• No consideration/remuneration is necessary to create an agency
• Similarly, a contract of agency is not compulsory. It is sufficient if a person acts on behalf of the principal and is accepted by the latter.
• An agency can be created either in writing or orally. An oral appointment is a valid appointment even though the contract of agency by which the agent is authorized has to be in writing.