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Contract of Agency

The document discusses the Indian contract of agency under the Indian Contract Act of 1872. It defines the terms agent and principal, outlines the creation of agency through express, implied, or ratification agreements, and describes the extent of an agent's authority including express, implied, apparent, necessity, and ratification authority.

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Ankita Sah
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23 views10 pages

Contract of Agency

The document discusses the Indian contract of agency under the Indian Contract Act of 1872. It defines the terms agent and principal, outlines the creation of agency through express, implied, or ratification agreements, and describes the extent of an agent's authority including express, implied, apparent, necessity, and ratification authority.

Uploaded by

Ankita Sah
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 PPTX, PDF, TXT or read online on Scribd
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Contract of agency

Indian contract act 1872

A contract of agency is a legal agreement between two parties, where one


party (the principal) authorizes another party (the agent) to act on their
behalf and create legal relationships with third parties
Definition of agent and principal
 These two terms have been defined in section 182 of the Indian Contract Act.
 An agent is a person employed to do any act for another or to represent another in dealings with
a third person.
 The person for whom the act is done, or who is represented,
is called the principal.
 Eg:- X appoints Y to deal with his bank transactions.
In this case, X is the principal, Y is the agent and Z is the third party.
Principal regarding the law of agency
The law of agency is based on the following two principles:-
• Whatever a person competent to contract may do by himself,
he may do through an agent, expect for acts involving
personal skills and qualifications.
• he who does an act through another, does it by himself.
In other words, this means the act of the agent are
considered to be the act of the principal. (sec.226)
for example:- A being B’s agent, with authority to receive money on his behalf, receives from
C a sum of money due to B. C is discharged of his obligation to pay the sum in question to B.
FEATURE OF CONTRACT OF AGENCY
• it is a bilateral contract , which means it involves obligations and rights for both the principal and the agent
• It is based on representation, which means the agent
acts on behalf of the principal and creates legal relations with third parties
• It requires no personal interest from the agent,
which means the agent must act in the best interest of
the principal and avoid any conflict of interest
• It is a consensual contract, which means it can be formed by
the mutual agreement of the principal and the agent, either expressly or impliedly
• It does not require consideration, which means the contract is valid even if the agent does not receive any
remuneration or reward from the principal.
creation of agency
The creation of agency is the process of establishing a legal relationship between a principal and an agent, where
the agent is authorized to act on behalf of the principal and bind them to contracts with third parties.
There are different methods of creating an agency, such as:
Agency of
express
agreement

Agency of Agency
Implied By
agreement operation

Agency by
ratification
Type of method to creating agency
• Agency by express agreement : This is when the principal and the agent explicitly agree on the terms and conditions of the
agency, either orally or in writing. For example, a power of attorney is a written document that grants an agent the authority to
act for the principal in certain matters .
• This is when the agency is inferred from the conduct, situation, or relationship of the parties, without any
agency by implied agreement:

express declaration. For example, a shopkeeper may imply that their employee is their agent to sell goods to customers
Case law
Extent of the authority of an agent
• The extent of the authority of an agent refers to the range of actions that the agent can perform on behalf of the principal, and that will bind the principal
legally to third parties. The extent of the agent’s authority depends on the terms of the contract of agency, the circumstances of the case, and the law
applicable to the situation.
• There are different types of authority that an agent may have, such as:
• Express authority: This is the authority that the principal explicitly grants to the agent, either orally or in writing. For example, a power of attorney is a
document that gives an agent express authority to act for the principal in certain matters
• Implied authority: This is the authority that the agent has by implication, based on the conduct, situation, or relationship of the parties, without any
express declaration. For example, a shopkeeper may imply that their employee is their agent to sell goods to customers
• Apparent authority: This is the authority that the agent appears to have, based on the words or actions of the principal, that lead a third party to believe
that the agent is authorized to act for the principal. For example, if a person regularly pays the bills of another person, the latter may be considered their
agent by apparent authority
• Necessity authority: This is the authority that the agent has in an emergency situation, to act for the principal’s benefit and prevent loss or damage to the
principal’s property or interests. For example, a ship captain may act as an agent of necessity for the ship owner, and sell the cargo to save the ship from
sinking4
• Ratification authority: This is the authority that the agent acquires after the fact, when the principal approves or confirms the agent’s actions that were
done without prior authorization. For example, a person may buy a car for another person without their knowledge, and the latter may ratify the purchase
by accepting the car.
Delegation of authority
• Sec 190 provides that an agent cannot lawfully employ another perform

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