When one party delegates some authority to another party whereby the latter performs his actions in a more or less independent fashion, on behalf of the first party, the relationship between them is called an agency. Agency can be express or implied. Chapter X of the Indian Contract Act, 1872 deals with the laws
The law of agency I based on the following general rules:
1. Whatever the principal can do by himself, he may get the same done through an agent, except when the act involved is of personal nature e.g. the principal cannot ask his agent to become solvent on his behalf or to marry on his behalf.
2. What person does by another, he does by himself. Thus, the acts of the agent are the acts of the principal.
Agent ( sec 182)
An “agent” is a person employed to do any act for another, or to represent another in dealings with third persons.
Who may be an Agent (Sec 184)
As between the principal and third persons, any person may become an agent, but no person who is not of the age of majority and of sound mind can become an agent,
Principal Sec 182
“The person for whom such act is done, or who is so represented, is called the “principal”.
Who may Employ Agent (Sec 183)
Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.
Consideration not necessary (185)
No consideration is necessary to create an agency. Thus contract of agency is an exception to
general rule contained in s 25 ( no contract can be valid without consideration.
Creation of Agency
An agency can be created by:
Direct (express) appointment– The standard form of creating an agency is by direct appointment. When a person, in writing or speech appoints another person as his agent, an agency is created between the two.
Implication– When an agent is not directly appointed but his appointment can be inferred from the circumstances, an agency by implication is created.
Necessity– In a situation of necessity, one person can act on behalf of another to save the person from any loss or damage, without expressly being appointed as an agent. This creates an agency out of necessity.
Estoppel– An agency can also be created by estoppel. In a situation where one person behaves in such a manner in front of a third person, as to make someone believe he is an authorized agent on behalf of someone, an agency by estoppel is created.
Ratification– When an act of a person, who acted as another person’s agent (on his behalf) without his knowledge is later ratified by that person, this creates an agency by ratification between the two.
So basically contract of agency is made when one party gives the authority to another party to act on his behalf. He delegates his work and lets the agent negotiate and enter into transactions on his behalf.
Narandas Morardas Gajiwala v S.P.A.M Papammal
It was held here that the provisions of the Contract Act are not exhaustive in such regard and it is an equitable remedy available with an agent to sue the principal under certain circumstances.
Jayabharthi Corp v. Sv P.N. Rajasekhara Nadar
In all such situations where the agent is misinforming the principal and a loss occurs due to his misconduct, he is liable to the principal